EUR/USD Weakness Brings January Opening Range in Focus

US Dollar Outlook: EUR/USD

The opening range for January is in focus as the recent rebound in EUR/USD pulled the Relative Strength Index (RSI) away from oversold territory, and it remains to be seen if the exchange rate will continue to track the negative slope in the 50-Day SMA (1.0541) as it still holds below the moving average.

EUR/USD Weakness Brings January Opening Range in Focus

EUR/USD snaps the recent series of higher highs and lows as it trades to a fresh weekly low (1.0273), and the exchange rate may struggle to retain the rebound from the monthly low (1.0224) amid the limited reaction to the ADP Employment report, which showed a 122K rise in December versus forecasts for a 140K print.

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In turn, the weakness in EUR/USD may persist as even as Federal Reserve Governor Christopher Waller believes that ‘inflation will continue to make progress toward our 2 percent goal over the medium term,’ and it seems as though the central bank will continue to unwind its restrictive policy in 2025 as ‘more cuts will be appropriate.’

US Economic Calendar

Nevertheless, the Fed may further adjust the forward guidance for monetary policy as the US economy shows little signs of a recession, and the update to the US Non-Farm Payrolls (NFP) report may encourage the Federal Open Market Committee (FOMC) to pause its rate-cutting cycle as employment is expected to increase 154K in December.

As a result, a positive development may generate a bullish reaction in the US Dollar, but a weaker-than-expected NFP report may drag on the Greenback as it puts pressure on Chairman Jerome Powell and Co. to implement lower US interest rates.

With that said, EUR/USD may consolidate over the coming days should it defend the monthly low (1.0224), but the exchange rate may track the negative slope in the 50-Day SMA (1.0541) as it struggles to trade back above the 2023 low (1.0448).

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

• EUR/USD snaps the recent series of higher highs and lows after failing to trade back above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone, and failure to defend the monthly low (1.0224) may spur another run at 1.0200 (23.6% Fibonacci retracement).
• A move below parity opens up 0.9950 (50% Fibonacci extension), but lack of momentum to test 1.0200 (23.6% Fibonacci retracement) may curb the recent weakness in EUR/USD.
• Need a break/close above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone for EUR/USD to threaten the negative slope in the 50-Day SMA (1.0541), with a breach above the moving average bringing the 1.0580 (78.6% Fibonacci extension) to 1.0610 (38.2% Fibonacci retracement) region on the radar.

Additional Market Outlooks

US Non-Farm Payrolls (NFP) Report Preview (DEC 2024)

USD/JPY Clears December High Ahead of US NFP Report

GBP/USD Recovery Keeps 2024 Range Intact

US Dollar Forecast: AUD/USD Approaches November 2023 Low

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong