EUR/USD Weakens Amid Holiday Market Doldrums and Tepid Risk Appetite
EUR/USD fell below the 1.0400 handle on Monday as holiday market conditions kept trading volumes muted. With New Year’s holidays midweek, investors remain cautious, avoiding significant moves in either direction. Thin data schedules and low conviction in risk assets have pushed the currency pair toward the lower end of recent ranges.
Holiday Market Constraints Limit Euro Action
German equity markets will be closed on Tuesday and Wednesday for New Year’s celebrations, further reducing market participation. With little new momentum, EUR/USD continues its steady drift downward, pressured by a broader cooling in global risk sentiment.
The only significant data releases from the Eurozone this week are German HCOB Manufacturing PMI and labor market reports. However, the final PMI figures are unlikely to provide any surprises, and labor data may point to an uptick in unemployment change for December, from 7K to 15K.
US Data and Fed Appearances Take Center Stage
In the US, December’s ISM Manufacturing PMI report, expected to tick down slightly from 48.4 to 48.3, will be the key focus on Friday. This, along with multiple Federal Reserve policymakers’ speeches throughout the week, could shape expectations around the Fed’s 2024 rate-cut trajectory. Recent Fed commentary has leaned towards a slower pace of monetary easing, keeping the US Dollar supported.
Technical Outlook for EUR/USD
From a technical standpoint, EUR/USD remains under pressure:
- Support Levels: The immediate support lies near 1.0350, with November’s low of 1.0332 acting as a critical floor.
- Resistance Levels: The 1.0400 handle remains the first hurdle, followed by broader congestion near 1.0450.
The pair has closed in the red for five consecutive weeks and has seen declines in all but two of the past 13 weeks. With this consistent bearish momentum, traders may eye further downside if key support levels are breached.
EUR/USD’s direction this week will likely hinge on the upcoming US ISM PMI figures and Fed commentary, alongside Germany’s labor market data. However, thin holiday trading volumes and muted risk appetite will keep the pair subdued in the near term. Traders should prepare for continued choppy conditions as the market awaits stronger catalysts in the new year.