EUR/USD Slips to $1.17 as PMI and Fed Bets Clash — Is a $1.1660 Test Next?
The Euro declined sharply on Friday, sending the EUR/USD pair to a low just below $1.1732. To add insult to injury...
Quick overview
- The Euro declined sharply on Friday, with the EUR/USD pair hitting a low just below $1.1732.
- Traders are closely monitoring upcoming German Manufacturing PMI data, which is expected to remain unchanged at 47.7.
- Despite the European Central Bank's steady stance on interest rates, the Euro continues to lose momentum amid growth concerns.
- The US Dollar remains strong, supported by risk aversion and interest rate expectations, overshadowing any potential support for the Euro.
The Euro declined sharply on Friday, sending the EUR/USD pair to a low just below $1.1732. To add insult to injury, the currency has been under even more pressure as the day drew to a close. Traders are currently keeping a close eye on some upcoming data from Germany – we’re expecting final Manufacturing PMI figures to be the same as last time, 47.7. There’s little chance this number will surprise markets, but it’s part of a bigger picture: a euro area industrial sector doing pretty badly, which isn’t exactly great news for the euro’s chances of bouncing back.
EUR/USD Price Update
At the moment, EUR/USD is just above $1.1720, some way below recent highs, and becoming increasingly sensitive to every new economic data point. To make matters worse, the euro area is still plagued by growth worries, meaning even if the data is good – which, to be fair, it probably won’t be – the euro’s going to be treated with a healthy dose of scepticism rather than optimism.
ECB Steady But The Euro Loses Momentum
Despite the European Central Bank sticking to its guns in December and signalling it would keep interest rates put for a while, the euro has been slipping. ECB boss Christine Lagarde has been saying that worries about the future make it tough to give any solid policy guidance – so, for now, traders aren’t getting much help from her or the ECB in knowing what’s going to happen next.
As a result, bigger economic forces are really calling the shots here. The US Dollar has been strengthening, and risk aversion has been on the rise – both have outweighed any help the euro might get from the ECB.
Dollar Finds Support From Risk and Interest Rate Expectations
Over in the US, the Dollar still looks solid despite a Fed rate cut almost on the cards in 2026. One reason for this is that the Dollar is being treated as a safe haven again, due to all the tensions between Russia and Ukraine, and also the ongoing feud between the US and Venezuela.
Policy expectations are also playing a role here. Looking at the CME FedWatch Tool, you can see that the market is giving the Fed an 85% chance of keeping rates steady in January. The chances of a 25-basis-point cut have dropped to 14.9%.
Remember, the Fed did lower rates in December, but only to the range of 3.50-3.75%, after cutting them by 75 basis points in 2025. Now, markets are starting to price patience rather than any real urgency in this area.
EUR/USD Technical Outlook: Is EUR/USD Starting to Fall Apart
From a purely technical viewpoint, EUR/USD can’t seem to hold above $1.1800, and has actually slipped below its 4-hour rising trendline. If you look at the chart, you can see small bodies and those repeated upper wicks around $1.1760 to $1.1800 – this points to sustained selling pressure, not a clean breakdown.
The pair is perched near the 38.2% Fibonacci retracement level just below $1.1700, and that’s now acting as near-term support. A clean break above $1.1700 would leave the 50% retracement level near $1.1660 exposed, which also coincides with the area where the price previously consolidated. Our RSI has been hovering near 36, showing weakening momentum but not exactly extreme conditions.
Trade idea: If EUR/USD breaks below $1.1700, it might head towards $1.1660, though the risk of this move would be contained if the price gets back above $1.1760.
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