EUR/USD languishes near lows following soft Eurozone data

EUR/USD consolidates previous losses at 1.1715 at the time of writing, down from nearly three-month highs above the 1.1800 line on Tuesday. The US Dollar (USD) is showing a somewhat firmer tone, following the release of a backlog of delayed US labour figures on Tuesday, while in Europe, German business confidence and Eurozone Inflation figures have disappointed.

Eurozone's final Harmonized Index of Consumer Prices (HICP) has revised inflationary prices for November lower, easing pressure on the European Central Bank to hike interest rates anytime soon. Beyond that, Data from the German IFO institute revealed that business sentiment deteriorated for the second consecutive month in the region's leading economy.

In the US, delayed figures released by the US Bureau of Labor Statistics revealed that employment fell sharply in October before increasing more than expected in November, while the Unemployment Rate in November increased to a four-year high, and wage growth moderated.

These figures should be taken with caution, as the US government shutdown might have distorted the data. However, the big picture continues to show a stalled labor market, which maintains investors' hopes of a March interest rate cut by the Fed intact, as shown by the CME Group's Fedwatch tool.

Daily Digest Market Movers: Euro corrects lower ahead of the ECB meeting

• The Euro (EUR) is correcting lower with investors awaiting the conclusion of the ECB's monetary policy meeting due on Thursday. The bank is widely expected to keep interest rates on hold, and investors will be looking for confirmation that the monetary easing cycle has come to an end.
• Eurostat has revised the Eurozone's November HICP growth to a 2.1% year-on-year rate, from the 2.2% previously estimated. The core HICP has been left unchanged at a 2.4% rate.
• Earlier in the day, German IFO data showed that the business climate deteriorated for the second consecutive month in December. The headline indicator eased to 87.6 from 88.0 in November, against the market consensus of a moderate improvement to 88.2. The index measuring the sentiment about the current economic situation remained unchanged at 85.6, below market expectations of 85.7, while the Expectations index dropped to 89.7 from 90.5. The market consensus had anticipated a steady reading, in this case.
• In the US on Tuesday, delayed Nonfarm Payrolls data showed a 105,000 net decline in employment in October and a 64,000 increase in November, this last beating expectations of a 50K increment. The Unemployment Rate, on the other hand, increased to 4.6%, from 4.4% in September, and wage growth moderated to a 3.5% year-on-year rate in November from 3.7% in October.
• Also on Tuesday, data from the US Commerce Department revealed that Retail Sales stalled in October, following a 0.1% increase in September, and against market expectations of another 0.1% rise. Excluding automobiles, sales of all other products rose 0.4% MoM.
• In the Eurozone, preliminary business activity data disappointed. The preliminary HCOB Manufacturing PMI eased to 49.2 in December from 49.6 in the previous month, and Services activity slowed down to 52.6 from 53.6 in November.
• On Wednesday's economic calendar, the Eurozone's HICP is expected to confirm the preliminary figures showing that inflation contracted 0.3% in November and accelerated to a 2.2% year-on-year pace, from 2.1% in October.
• In the US, the focus will be on the speeches from Fed Governor Christopher Waller, New York Fed President John Williams, and Atlanta Fed President Raphael Bostic, which might give further hints about the central bank's monetary policy plans.

Technical Analysis: EUR/USD bears focus on 1.1685

The EUR/USD pair has been rejected at the 1.1800 and is going through a bearish correction, with sellers targeting the 1.1685 area, where the December 11 low meets the trendline support from November 20 lows.

The 4-hour Relative Strength Index (RSI) has dropped below the 50 level, and the Moving Average Convergence Divergence (MACD) indicator has turned sharply lower after crossing below the signal line, which highlights a growing negative momentum.

The mentioned 1.1685 level is a key support to maintain the broader bullish trend intact. A confirmation below here would clear the path towards the December 9 low, at 1.1615, ahead of the December 1 and 2 lows, near 1.1590.

To the upside, the pair should return above the broken support around 1.1720 (December 12 low) to shift the focus towards Tuesday's high, near 1.1800, and the September 23 and 24 highs, near 1.1820.