EUR/USD drops to 1.1650 as robust US employment figures strengthen the Dollar

EUR/USD Extends Decline as Strong US Employment Data Lifts Dollar

The EUR/USD currency pair continued its downward trend for a fourth consecutive session on Thursday, pressured by robust US labor market figures. Meanwhile, data from the Eurozone suggested that the European Central Bank's cycle of monetary easing may have concluded, as December saw a decline in producer prices across the region. At the latest update, the pair was trading at 1.1652, marking a 0.19% decrease.

Dollar Strengthens as US Labor Market Outshines Eurozone Performance

Investors are increasingly favoring the US Dollar ahead of the upcoming Nonfarm Payrolls release, buoyed by encouraging employment statistics. Wednesday’s ADP report indicated solid job growth, and the December Challenger Job Cuts data revealed a reduction in layoffs compared to November.

Further support for the Dollar came from the latest jobless claims report, which showed fewer Americans than anticipated filed for unemployment benefits.

As a result, the US Dollar Index (DXY) climbed 0.19% to 98.91, moving above the significant 200-day Simple Moving Average (SMA) at 98.87. If the DXY closes above this level, it could pave the way for a move beyond the 99.00 threshold.

Despite dovish remarks from Fed Governor Stephen Miran, market participants largely disregarded them, having already factored in two rate reductions, according to Prime Market Terminal. Meanwhile, US Treasury Secretary Scott Bessent urged Federal Reserve officials to consider lowering interest rates sooner to stimulate economic growth.

Across Europe, economic reports were plentiful. Inflation continued to moderate and consumer confidence saw gains. However, the Economic Sentiment Indicator weakened in December, impacted by declines among service providers, retailers, and consumers.

Looking ahead, the Eurozone’s economic calendar includes retail sales data, remarks from ECB’s Philip Lane, and German industrial production figures. In the US, key releases will be Nonfarm Payrolls, the unemployment rate, University of Michigan consumer sentiment, and housing statistics.

Key Market Drivers: Euro Under Pressure from US Employment Strength

• US Initial Jobless Claims for the week ending January 3 registered at 208,000, slightly above the previous week’s 200,000 but below the forecast of 210,000, according to the Department of Labor.
• These figures reinforce the view of a gradually improving labor market, following the December Challenger Job Cuts report, which showed 35,553 layoffs—nearly half the number reported in November.
• The US trade deficit for goods and services narrowed sharply in October to $29.4 billion from $48.1 billion, defying expectations for a wider gap. The improvement was largely due to a significant drop in imports, especially pharmaceuticals.
• The New York Fed’s Survey of Consumer Expectations revealed mixed sentiment: short-term inflation expectations edged higher, while medium- and long-term outlooks remained steady.
• One-year inflation expectations increased to 3.4% in December from 3.2%, while three- and five-year projections held at 3.0%, indicating ongoing but contained inflation concerns.
• In the Eurozone, the Producer Price Index (PPI) rose by 0.5% in October, surpassing expectations of a 0.2% increase. Year-over-year, producer prices fell by 1.7%, a slower decline than the anticipated 1.9% drop.
• Additional data showed improvements in consumer confidence and business climate in December. German factory orders for November surged by 5.6% month-over-month, well above the 1% forecast and up from 1.6% in October.

Technical Analysis: EUR/USD Faces Further Downside as 200-Day SMA Comes Into Focus

The EUR/USD technical outlook has deteriorated, with the pair likely to end the day below Wednesday’s low of 1.1672. The Relative Strength Index (RSI) indicates a neutral-to-bearish trend, and sellers are aiming to push the pair beneath the crucial 200-day SMA at 1.1561.

On the downside, immediate support is found at the 50-day SMA at 1.1640, followed by the 200-day SMA near 1.1561. For buyers to regain control, the pair would need to reclaim the 1.1700 level, with further resistance at the 20-day SMA at 1.1733.

EUR/USD daily chart