EUR/USD Slips Near 1.1720 as 64K NFP Clash With ECB’s 2% Rate Pausev
EUR/USD dipped in early European trading and now hovers around $1.1720, its upward momentum stalling amid renewed US dollar demand.
Quick overview
- EUR/USD has dipped to around $1.1720 as US dollar demand increases, stalling its upward momentum.
- The euro is supported by expectations that the ECB will maintain its deposit rate at 2%, limiting significant downward pressure.
- Mixed US job numbers have kept the dollar in demand, despite a rise in the unemployment rate and stagnant retail sales.
- Technically, EUR/USD remains above a rising trendline, suggesting that the current pullback may be more of a consolidation than a reversal.
EUR/USD dipped in early European trading and now hovers around $1.1720, its upward momentum stalling amid renewed US dollar demand. This is a consequence of the market reevaluation of the relative monetary policy moves by the Federal Reserve and the European Central Bank following a brief pop-up towards $1.1780 at the end of last week.
While the greenback found some support amid fresh US job numbers, the euro has so far avoided a more significant slide. Market analysts think the ECB has little room to ease monetary policy further, limiting downward pressure on the euro even though near-term momentum has slowed.
ECB Rate Pause Expectations Give the Euro a Helping Hand
The euro continues to get some support from the continued expectation that the ECB will keep its deposit rate steady at 2%. They’ve held it there since July after all, & given the fragile growth situation in the Eurozone, policymakers are cautious about making any drastic cuts.
This relatively stable stance has put investors at ease, as policy divergence between the US and the Eurozone won’t be increasing anytime soon. As a result, euro selling has been fairly restrained rather than all-out aggressive, even though the dollar is strengthening.
Key ECB backdrop backing EUR:
- Deposit rate expected to stay right where it is, at 2%
- Slow down in inflation accompanied by weak growth
- Cautious outlook for policy into the end of the year
Mixed US Jobs Numbers Kept the Dollar in High Demand
The dollar benefited from the November Non-Farm Payrolls, which came in higher than expected at 64,000, rather than the 50,000 forecast. But the details were less convincing than the headline numbers.
The unemployment rate jumped to 4.6%, while average hourly earnings rose by only 0.1% a month, suggesting that wage pressure is starting to ease. Retail sales came in flat, too, reinforcing the idea that demand is cooling but not collapsing.
It’s this mix – sometimes confusing for the Fed, and that’s helped the dollar to stay in demand as people see it more as a safe place to be.
EUR/USD Technical Outlook: Trend Remains, But Momentum is Losing Steam
From a technical perspective, EUR/USD still looks constructive, even with the current pullback. On the four-hour chart, price is still perched above a rising trendline that started in early December, suggesting underlying demand is still kicking in at dips.
- Trades just above the 50-ema at $1.1705.
- The 100-ema near $1.1669 continues to slope upwards.
- RSI is around 46, showing some cooling of momentum, but certainly not going into oversell territory
Levels to keep an eye on:
- Resistance $1.1745, then $1.1780, $1.1810
- Support $1.1700 then $1.1678
If the trendline support holds, the current pullback is starting to look more like consolidation than an actual reversal. A big push above $1.1780 might open the door to some more upward momentum into the end of the year.
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