Euro trims gains despite the downbeat US Jobless Claims data

The Euro (EUR) maintains its positive tone during Thursday’s US Session opening although the US Dollar has pared some losses following higher-than-expecte US Jobless Claims. The US Dollar is picking up from five-month lows,  although investors' hopes of Fed cuts are likely to keep upside attempts limited.

Later today, November´s Pending Home sales are expected to have shown some improvement in November which, in the absence of more relevant data might contribute to a deeper USD correction. 

The macroeconomic data released last week confirmed the narrative of cooler inflation and a softening economic growth, the soft-landing scenario that will allow the Federal Reserve (Fed) to gradually roll back its restrictive monetary policy.

In the European Union, Austrian Nartional Bank Governor and ECB member, Rober Holzmann has warned that it is still too early to discuss rate cuts and that such a scenario is far from certain. This reinforces the hawkish stance of the ECB President Lagarde after December´s meeting and provides some support to the Euro.

Daily digest market movers: US Dollar dives with investors bracing for Fed cuts in 2024

• The Euro consolidates at five-month highs above 1.1100, with the US Dollar weighed on hopes of Fed rate cuts.
   
• US Weekly Jobless Claims increased by 118K in the week of December 15, beating expectations of a 110K reading. 
   
• US Pending home sales are seen increasing by 1% in November after a 1.5% decline in October.
   
• Last week, the US PCE Prices Index data showed that inflation is decelerating at a faster-than-expected pace
   
• Before that, the US Gross Domestic Product was revised to a 4.9% growth in the third quarter, down from the 5.2% previously estimated
   
• The calendar is light this week and investors remain focused on last week’s figures to feed hopes that the Fed will start cutting rates in early 2024.
   
• Futures markets are pricing nearly 90% chances of Fed cuts in March, and 150 bps cuts in the whole year, according to the CME Group Fed Watch Tool.
   
• In contrast, the ECB struck a more hawkish tone after its December policy meeting, defending the “higher for longer” view, which is underpinning support for the Euro.

Technical Analysis: Euro remains steady above previous highs at 1.1010

The Euro maintains its bullish bias with price action standing comfortably at five-month highs in the vicinity of 1.1100. The Dollar Index remains close to multi-moth lows, with upside attempts capped below the previous support at 101.40 so far.

The pair is going through a corrective reaction as the overbought levels on intra-day charts were anticipating. The broader trend, however, remains positive, with a support area at 1.1000/10 likely to cap bears. Below here, the next targets are 1.0930 and 1.0885.

On the upside, immediate resistance remains at the July 27 high, 1.1145, which closes the path toward the 2023 high, at 1.1280.