- Summary:
- The green buck continues to make gains against the euro, but EUR/USD could make some gains from Germany's latest positive economic data.
EUR/USD opened low in early trading hours on Tuesday, continuing with a five-day losing streak. The pair was at -0.46% at 9.25 GMT and looks headed below the 9-MA. The euro is still reeling from an underperforming Eurozone economy, under pressure from high energy bills. Furthermore, the European Central Bank’s decision to maintain high interest rates seems to be exerting more downward pressure.
The daily EUR/USD movement will likely react to Tuesday’s Eurozone Monthly Retail Sales data, which indicates a decline in consumer spending in December. The dollar has also gained more upthrust from Monday’s release of U.S. ISM Non-manufacturing PMI, which printed at 53.4, to beat analysts’ consensus projection of 52. This, combined with strong jobs market data reported last week, underlines a positive outlook for the world’s largest economy.
With the Fed Chairman stating on Sunday that they will maintain a cautious approach to cutting interest rates, it is almost certain that there will be no interest rate changes in March. In the meantime, the euro will continue feeling the pressure from Germany’s shrinking economy.
Europe’s largest economy faces a combination of challenges, headlined by a property market whose underperformance stretches back to April 2022. It gets worse for the German economy, as its December exports fell 4.6%, higher than the projected 2%. Also, its January Composite PMI fell below expectations, registering at 47.0 against the projected 47.1.
On the positive side, the December data on German Factory Orders beat projections significantly, showing an 8.9% rise against a projected decline of –0.1%. This could help the euro salvage some gains.
Technical analysis
The EUR/USD upward action is likely to be limited by weak momentum, which has the RSI headed under the 9-MA. This will likely limit the pair’s gains below 1.0765, with the first support at 1.0720 and the second one at 1.0700. However, a breach of the first resistance at 1.0765 could build momentum to push the next upper limit to 1.7085. Above this level, the price could go as high as 1.0805.
