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The EUR/USD dives over 0.28% on Tuesday even though economic data in the United States (US) was mixed, while Federal Reserve officials delivered neutral-to-dovish comments. Meanwhile, data in the Eurozone shows that economic activity is decelerating in the bloc. The pair trades at 1.1690 after hitting a high of 1.1742.

Euro tumbles on weak data; fading geopolitical risks offset mixed US numbers, dovish Fed tones

The US Dollar is trimming some of Monday’s losses. Market participants shrugged off geopolitical risks after the US captured the Venezuelan President Nicolas Maduro over the weekend. Also, the lack of progress of peace talks to resolve the Ukraine-Russia conflict, keeps the shared currency pressured.

In the US, Purchasing Managers’ Indices (PMI) weakened in December, compared to the previous month. Meanwhile, Fed Governor Stephen Miran was dovish as expected, while Richmond Fed President Thomas Barkin is leaning neutral-hawkish, as he acknowledged that policy is within neutral.

In Europe, PMIs revealed a slowdown in activity in the services sector. Inflation in Germany, the largest European economy dipped below the European Central Bank (ECB) 2% goal, a reaffirmation that the ECB’s has concluded, unless economic growth is compromised.

Ahead, the EU economic docket will feature the EU’s Harmonized Index of Consumer Prices (HICP) for December, along with inflation figures on Italy and Retail Sales in Germany.

On the US front, traders focus would be on the ADP Employment Change figures, the ISM Services PMI, the JOLTS Job Openings and speeches by Fed officials.

Daily digest market movers: Euro pressured by dip on German inflation

• December’s S&P Global Services PMI showed that business activity is losing momentum in the US. The index eased from 54.1 to 52.5 while the Composite PMI dipped to 52.7 from 54.2.
• Chris Williamson, Chief Business Economist at S&P Global Market Intelligence noted that “Business activity continued to expand in December, rounding off another quarter of robust growth, but the resilience of the US economy is showing signs of cracking.”
• Fed officials crossed the wires. Richmond’s Thomas Barkin said future rate decisions will need to be “finely tuned,” citing competing risks to the labor market and inflation. He added that the current policy rate sits within the neutral range and stressed the importance of monitoring both sides of the Fed’s dual mandate.
• Earlier, Stephen Miran struck a dovish tone, saying the central bank is likely to adjust rates lower as incoming data point toward the need for easing. Miran added that conditions could warrant up to 100 basis points of rate cuts in 2026.
• The US Dollar Index (DXY), which tracks the buck’s value against six other currencies, post gains of 0.25% at 98.61, but failed to cap Gold gains.
• The Eurozone HCOB Services Purchasing Managers Index (PMI), dipped to 52.4 in December, down from a preliminary reading of 52.6 and after 53.1 in November.
• German inflation data as measured by the Harmonized Index of Consumer Prices (HICP) fell from 2.6% to 2% YoY.

Technical outlook: EUR/USD slumps below 1.1700

Tuesday dip changed the EUR/USD technical picture from neutral to upward biased, to neutral. Failure of printing a daily close above 1.1700 exerts downward pressure on the pair, which is 20-pips shy of hitting the 100-day Simple Moving Average (SMA) at 1.1663.

In that outcome, the EUR/USD next support is the 100-day SMA, followed by the 50- and the 200-day SMAs, each at 1.1639 and 1.1553, respectively.

For a bullish resumption, bulls must clear the 20-day Simple Moving Average (SMA) at 1.1729, ahead of 1.1750, which would clear the path towards 1.1800.

(Click on image to enlarge)

EUR/USD daily chart

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