EUR/USD analysis: downward correction set to extend short-term

EUR/USD Current price: 1.2016

  • Dollar gains against its European rivals, after strong local data.
  • FOMC Minutes gave the greenback a modest boost, not a game changer.

Majors closed the day mixed, with the European currencies being the worst performers against the greenback. The EUR/USD pair extended its retracement from the multi-month high of 1.2008 to trade as low as 1.2003 early US session, to finally settle around 1.2015. The American dollar found some demand ahead of the US opening, helped by the release of some solid local data, as the ISM manufacturing PMI for December, came in at 59.7, well ahead of the 58.2 figure for November, also beating market's expectations of 58.1. Construction spending also rose in the US by more-than-anticipated in November, up 0.8%. The macroeconomic day ended with the release of FOMC's Meeting Minutes, which brought nothing new to the table, with most officials backing gradual rate hikes. The greenback gained a few pips after the release but were surely not a game changer.

Attention now shifts toward US employment data as the country will release its usually weekly unemployment claims this Thursday, alongside with the ADP private employment survey, ahead of Friday's Nonfarm Payroll report. Also, the final Markit services and composite PMIs for the EU and the US will be out this Thursday.

Despite recovering some ground, is clear that the dollar is still out of market's favor, and while Friday's employment report can revive dollar's demand temporarily a bullish greenback is still out of sight. The EUR/USD pair 4 hours chart shows that the price is currently defying a bullish 20 SMA, while technical indicators head south, the Momentum pressuring its 100 level, and the RSI around 55, both coming straight from overbought conditions, suggesting that the ongoing decline is just corrective. A bearish acceleration through the 1.2000 figure can lead to a test of 1.1920, while a steeper recovery could be confirmed by a break above 1.2100 a strong static resistance.

Support levels: 1.2000 1.1960 1.1920                                                  

Resistance levels: 1.2065 1.2100 1.2140

View Live Chart for the EUR/USD            

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.