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• Eurozone S&P Global Manufacturing PMIs were mixed and weighed on the euro.
• European Central Bank Nagel said the ECB needs to take further action to tackle inflation.

The euro looks set to shed some ground against the US dollar on the first trading day of 2023 amidst thin liquidity conditions in the financial markets. The release of S&P Global PMIs in the Eurozone failed to bolster the shared currency on Monday. At the time of writing, the EUR/USD currency pair has been recently seen trading at around 1.0657 after hitting a daily high of 1.0699.

European equities have recently been trading in the green. S&P Global revealed that the Purchasing Managers Index (PMI) for factory activity in the EU, which came mixed with Spain and France’s Manufacturing PMI, exceeded estimates. This is in contrast to Germany, which extended its downward trajectory to 47.1. Italy and the whole Euro area remained unchanged, each at 48.5 and 47.8, respectively.

In the meantime, the Bundesbank President and European Central Bank (ECB) policymaker Joachim Nagel crossed newswires on a German newspaper, and he said he’s optimistic that Germany can avoid a serious economic slump. Nagel added that the ECB was not seeing a wage spiral and reiterated that the ECB needs to take further action to curb inflation expectations.

In the meantime, the US Dollar Index, a measure of the buck’s value against a basket of peers, climbed 0.14% to 103.63, off the six-month lows hit during the past week at 103.38. The lack of US and Canadian economic data has been keeping traders leaning instead on market sentiment and technicals.

Ahead of the week, the Eurozone economic docket will feature employment data in Germany alongside the inflation rate. Regarding the US economic calendar, the S&P Global Manufacturing PMI for December is expected to remain at 46.2, which could be a prelude to the Institute for Supply Management (ISM) factory activity on Wednesday.

EUR/USD Price Analysis: Technical Outlook

The EUR/USD daily chart suggests that the pair might peak at around 1.0700, a level the duo was unable to crack in December. The pair has recently been trimming some of its early gains as it has been edging toward 1.0660. Even though it broke above an eight-month-old downslope trendline, the EUR/USD pair failed to extend its gains, opening the door for a re-test of the previously mentioned trendline at around 1.0550.

Oscillators like the Relative Strength Index (RSI) and the Rate of Change (RoC) started to aim down, suggesting that sellers are beginning to gather momentum. Therefore, the EUR/USD first support would be the 1.0600 mark, followed by the 20-day Exponential Moving Average (EMA) at 1.0584, ahead of 1.0550.

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