EUR/USD dives beneath 1.0750 to 4-week lows around 1.0720s

The EUR/USD extended its fall to new four-week lows at around 1.0720s due to broad US Dollar (USD) strength after last Friday’s data reaffirmed the need for higher interest rates in the United States. Hence, money market futures began to price in higher interest rates, underpinning the US Treasury bond yields and the buck. At the time of typing, the EUR/USD exchanges hands at 1.0730.

Factory orders in Germany advanced, though the Euro remains downward pressured

The EUR/USD lost traction on Friday, as the US Department of Labor revealed that 517K jobs were added to the economy, crushing the 200K expectations and sending the Unemployment Rate dipping towards 3.4% from 3.5%. That triggered a sell-off of currencies, except the buck in the FX space, particularly the Euro. Even though the European Central Bank (ECB) raised rates by 50 bps, President Lagarde’s press conference was perceived as dovish, albeit the chorus of hawks expecting further aggression by the central bank.

Datawise, the European docket reported soft Retail Sales for December, which plunged to -2.7% MoM, vs. a -2.5% contraction expected. Consequently, the YoY rate was -2.8% compared to -2.7% estimates by street analysts.

Earlier in the European session, Germany revealed that factory orders improved from December’s 4.4% MoM plunge to 3.2% expansion, smashing estimates of 2%, but annually paced, barely improved to -10.1% vs. -10.2% estimated. In other data, Industrial Production in Germany and Spain will be featured on Tuesday, while Italy will do it on Friday.

On central bank speaking, the ECB’s Robert Holtzmann said, “Monetary policy must continue to show its teeth until we see a credible convergence to our inflation target.” At the same time, Kazaks added that if the incoming data meet the ECB’s current expectations, “rates will be raised by 50 basis points in March.

An absent economic calendar shifted traders’ focus to Tuesday on the US front. The docket will feature the Trade Balance alongside the Federal Reserve Chair Jerome Powell’s interview at the Economic Club of Washington.

EUR/USD Technical Analysis

After last Friday’s US NFP report, the EUR/USD broke crucial support at the 100-day Exponential Moving Average (EMA) at 1.0850. In addition, an inverted hammer, a bearish signal, emerged, opening the door for further downside. Therefore, the Euro resumed its downtrend, plunging last Friday’s low of 1.0835 and beneath 1.0800 below. That said, the EUR/USD next support would be the 1.0700 psychological level, which, once cleared, would expose the 50-day EMA At 1.0579, followed by the 20-day EMA at 1.0533, ahead of the 1.0500 mark.