EUR/USD remains on the defensive with all eyes on German HICP data

EUR/USD has given away previous gains on Tuesday and is trading at 1.1710, after rejection at 1.1740. The downward revision of December's Eurozone Services PMI figures has renewed bearish pressure on the Euro. which bounced higher on Monday amid weak US manufacturing activity data and dovish comments from Federal Reserve (Fed) speakers.

Eurozone HCOB Services Purchasing Managers' Index (PMI) has been revised down to 52.4, from the previous estimation of 52.6, and a reading of 53.1 in November. The market awaits now the release of the German preliminary Harmonized Index of Consumer Prices (HICP) reading for December, which might determine the Euro's (EUR) near-term trend.

On Monday, the US ISM Manufacturing PMI figures revealed that the sector's business activity fell at its fastest pace in the last 14 months, with new orders contracting while prices keep rising. This, coupled with some dovish comments by Minneapolis Fed President Neel Kashkari, renewed hopes of further monetary easing by the US central bank and sent the US Dollar lower.

In the US session on Tuesday, Richmond Fed President Thomas Barkin's speech and the final S&P Global Services PMI might have some impact on the US Dollar, although the main focus is on a string of US labour data, due later this week, especially Friday's Nonfarm Payrolls (NFP) report.

Daily Digest Market Movers: Cautious markets with key US employment releases ahead

• The Euro-Dollar is going through choppy trading on Tuesday. Recent macroeconomic data from Europe and the US has failed to convince traders, and the market awaits a string of key US labour reportss to better assess the timing of the Fed's easing calendar..
• Data released on Monday revealed that the US ISM Manufacturing PMI dropped to 47.9 in December from 48.2 in November, compared to expectations of a mild improvement to 48.3. New orders edged up to 47.7 from 47.4 in the previous month but remain in contraction territory, while the Prices Paid subindex remained unchanged at 58.5, levels reflecting significant inflationary pressures.
• Later on, Minneapolis Fed President Neel Kashkari said that inflationary pressures are slowly trending down, but warned that the jobless rate could "pop" higher, which supported market hopes of further Fed monetary easing.
• Geopolitical concerns triggered by the US military intervention in Venezuela have mostly remained subdued. Nicolás Maduro pleaded not guilty in a New York Federal Court, and investors have taken in stride China's warnings about "hegemonic acts" that violate international law.
• On the Eurozone calendar, the main attraction will be Germany's preliminary HICP figures for December, which are expected to show that inflation bounced up 0.4% in the month, from -0.5% in November. The yearly rate, however, is seen easing to 2.2% from 2.6% in the previous month.
• In the US, the final US S&P Global Services PMI is the only macroeconomic release worth mentioning today. Preliminary estimations showed a slowdown to 52.9 in December, from 54.1 in November.

Technical Analysis: EUR/USD hesitates above 1.1700

The EUR/USD found support at the 1.1670 area on Monday but is failing to find significant acceptance above 1.1700. Technical indicators are mixed. The 4-hour Moving Average Convergence Divergence (MACD) line has crossed over the Signal line, which highlights an improving momentum, but the Relative Strength Index (RSI) remains capped below the 50 level in neutral-to-negative territory.

Session lows near 1.1710 are holding bears for now, ahead of Monday's low of 1.1660. Further down, the next target is at the December 8 and 9 lows, in the area of 1.1615.

To the upside, the session high of 1.1740, is closing the path towards the January 2 high, at 1.1765. Further up the confluence of a reverse trendline with December's peak, at 1.1808, is likely to pose significant resistance.