Euro Analysis: Continued dollar weakness helps euro rise slightly against dollar
2026-01-16 20:03:25
The euro rose slightly against the dollar on Friday (January 16), trading at 1.1619/22, up 0.10%, after hitting a six-week low of 1.1593 on Thursday. However, influenced by strong US economic data, the market generally believes that the Federal Reserve will keep interest rates unchanged in the coming months, and the euro is likely to record its third consecutive week of decline against the dollar.
Data released by the U.S. Labor Department on Thursday showed that the number of Americans filing initial claims for unemployment benefits was lower than market expectations, falling to its lowest level since November of last year, which to some extent eased market concerns about a deteriorating labor market.
Meanwhile, the New York Fed Manufacturing Index and the Philadelphia Fed Manufacturing Survey both exceeded expectations, highlighting a strong start to the year for U.S. manufacturing.
Data released in the Eurozone on Friday confirmed that German consumer inflation fell back to the European Central Bank's annual target of 2% in December. In the US, market focus will be on December industrial production data, as well as speeches by Federal Reserve Vice Chairs Michelle Bowman and Philip Jefferson.
Market Update: Strong Data Continues to Support the US Dollar
The dollar index gave back some of its gains on Friday, but its overall bullish trend remains unchanged. Recent US economic data reflects the resilience of the US economy, while inflation remains high, prompting investors to lower their bets on the Federal Reserve easing monetary policy in the near term.
For the week ending January 10, the number of Americans filing initial claims for unemployment benefits fell to 198,000 from 207,000 the previous week, below market expectations of 215,000.
The New York Fed's manufacturing index rebounded to 7.7 in January, compared with -3.7 in December. This figure, far exceeding market expectations of 1, indicates a significant improvement in the business environment for manufacturing.
Coincidentally, the Philadelphia Fed Manufacturing Index jumped from -8.8 in December to 12.6 in January, also exceeding the expected value of -2. Component data showed that new orders and shipments both rose, the employment index declined but still improved overall compared to previous months, and price levels remained above the long-term average.
Against this backdrop, hawkish comments from Federal Reserve officials further supported the dollar. Atlanta Fed President Rafael Bostic and Kansas City Fed President Jeffrey Schmid reiterated that given persistent inflationary pressures, it is necessary to keep interest rates at a restrained level.
In the Eurozone, Germany's final harmonized index of consumer prices for December confirmed a 0.2% month-on-month decline and a 2.0% year-on-year increase, compared to -0.5% and 2.6% respectively in November. Following the data release, the euro exchange rate rebounded slightly from its lows.
Technical Analysis
(EUR/USD daily chart source: FX678)
The technical outlook for EUR/USD has become increasingly bearish, with the pair breaking below and closing below the Ichimoku Cloud for the first time since early December. Meanwhile, the conversion line (TENKAN, 1.1667) has formed a bearish alignment below the baseline (KIJUN, 1.1700), and coupled with weakening momentum indicators, the overall bearish structure has been reinforced.
Observing the intraday price action, the EUR/USD pair touched a low of 1.1593, just a step away from the key 200-day moving average (MA200, 1.1582). The subsequent rebound was weak, only reaching 1.1614 before encountering resistance and falling back. It's worth noting that as of the week ending January 6th, the market still held over $23 billion in long positions in EUR/USD. These accumulated long positions are continuing to exert downward pressure on the exchange rate, resulting in severely insufficient upward momentum after testing the 200-day moving average.
The MACD indicator shows that the green bars continue to expand, and both DIFF (-0.0014) and DEA (0.0002) are below the zero axis, releasing a clear bearish momentum signal; the 14-day RSI indicator is currently reading 39.52, which is in the weak zone below the 50 strong/weak watershed, further confirming the short-term downward pressure.
Regarding subsequent support levels, the exchange rate will most likely test 1.1548 (the 76.4% Fibonacci retracement of the 1.1468-1.1807 range from November to December). If the 200-day moving average (1.1582) is broken, further support will be seen at 1.1541 (the lower bound of the November-December rally). Once this level is breached, the exchange rate may fall back towards the previous low of 1.1468. Overall, the downside risks facing EUR/USD in the short term are continuing to rise.
Data released by the U.S. Labor Department on Thursday showed that the number of Americans filing initial claims for unemployment benefits was lower than market expectations, falling to its lowest level since November of last year, which to some extent eased market concerns about a deteriorating labor market.
Meanwhile, the New York Fed Manufacturing Index and the Philadelphia Fed Manufacturing Survey both exceeded expectations, highlighting a strong start to the year for U.S. manufacturing.
Data released in the Eurozone on Friday confirmed that German consumer inflation fell back to the European Central Bank's annual target of 2% in December. In the US, market focus will be on December industrial production data, as well as speeches by Federal Reserve Vice Chairs Michelle Bowman and Philip Jefferson.
Market Update: Strong Data Continues to Support the US Dollar
The dollar index gave back some of its gains on Friday, but its overall bullish trend remains unchanged. Recent US economic data reflects the resilience of the US economy, while inflation remains high, prompting investors to lower their bets on the Federal Reserve easing monetary policy in the near term.
For the week ending January 10, the number of Americans filing initial claims for unemployment benefits fell to 198,000 from 207,000 the previous week, below market expectations of 215,000.
The New York Fed's manufacturing index rebounded to 7.7 in January, compared with -3.7 in December. This figure, far exceeding market expectations of 1, indicates a significant improvement in the business environment for manufacturing.
Coincidentally, the Philadelphia Fed Manufacturing Index jumped from -8.8 in December to 12.6 in January, also exceeding the expected value of -2. Component data showed that new orders and shipments both rose, the employment index declined but still improved overall compared to previous months, and price levels remained above the long-term average.
Against this backdrop, hawkish comments from Federal Reserve officials further supported the dollar. Atlanta Fed President Rafael Bostic and Kansas City Fed President Jeffrey Schmid reiterated that given persistent inflationary pressures, it is necessary to keep interest rates at a restrained level.
In the Eurozone, Germany's final harmonized index of consumer prices for December confirmed a 0.2% month-on-month decline and a 2.0% year-on-year increase, compared to -0.5% and 2.6% respectively in November. Following the data release, the euro exchange rate rebounded slightly from its lows.
Technical Analysis
(EUR/USD daily chart source: FX678)
The technical outlook for EUR/USD has become increasingly bearish, with the pair breaking below and closing below the Ichimoku Cloud for the first time since early December. Meanwhile, the conversion line (TENKAN, 1.1667) has formed a bearish alignment below the baseline (KIJUN, 1.1700), and coupled with weakening momentum indicators, the overall bearish structure has been reinforced.
Observing the intraday price action, the EUR/USD pair touched a low of 1.1593, just a step away from the key 200-day moving average (MA200, 1.1582). The subsequent rebound was weak, only reaching 1.1614 before encountering resistance and falling back. It's worth noting that as of the week ending January 6th, the market still held over $23 billion in long positions in EUR/USD. These accumulated long positions are continuing to exert downward pressure on the exchange rate, resulting in severely insufficient upward momentum after testing the 200-day moving average.
The MACD indicator shows that the green bars continue to expand, and both DIFF (-0.0014) and DEA (0.0002) are below the zero axis, releasing a clear bearish momentum signal; the 14-day RSI indicator is currently reading 39.52, which is in the weak zone below the 50 strong/weak watershed, further confirming the short-term downward pressure.
Regarding subsequent support levels, the exchange rate will most likely test 1.1548 (the 76.4% Fibonacci retracement of the 1.1468-1.1807 range from November to December). If the 200-day moving average (1.1582) is broken, further support will be seen at 1.1541 (the lower bound of the November-December rally). Once this level is breached, the exchange rate may fall back towards the previous low of 1.1468. Overall, the downside risks facing EUR/USD in the short term are continuing to rise.
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