EUR/USD Price Forecast: Optimism fuels Euro demand

EUR/USD Current price: 1.0400

• The Hamburg Commercial Bank upwardly revised the December Eurozone PMIs.
• Talks about plans of narrower than anticipated US tariffs weighed on the US Dollar.
• EUR/USD advances on a better mood, meets sellers around 1.0430.

The EUR/USD pair advances at the beginning of the week, holding near an intraday high of 1.0431 posted during European trading hours amid a better market mood.

Data coming from the Eurozone failed to impress despite upbeat figures. The Hamburg Commercial Bank (HCOB) released the final estimates of the December Purchasing Managers’ Index (PMI), showing services output was slightly better than previously anticipated, confirmed at 51.6 from a preliminary estimate of 51.4.

The Composite PMI resulted at 49.6, slightly better than the 49.5 expected, yet still indicating contraction. The official report noted that the soft figure resulted from shrinking activity levels amid sustained falls in new business and employment. There was also an intensification of inflationary pressures, while firms’ growth expectations for the coming 12 months remained weak despite improving to a three-month high.

United States (US) headlines boosted the mood, as the Washington Post reported that Donald Trump's transition team is said to be working on tariffs. According to people familiar with the matter, tariffs will focus on key sectors deemed vital to national security, such as defense,  medical supplies, and energy, narrowing the universal tariffs plan that generated concerns. As a result, the US Dollar came under strong selling pressure across the FX board.

The macroeconomic calendar includes the preliminary estimate of the German Harmonized Index of Consumer Prices (HICP) and US November Factory Orders. Also, S&P Global will publish the final estimates of the December US Services and Composite PMIs.

EUR/USD short-term technical outlook

The EUR/USD pair trimmed most of last week’s losses and hovers around 1.0400 ahead of the US opening. In the daily chart, however, sellers are aligned around a bearish 20 Simple Moving Average (SMA), providing dynamic resistance at 1.0430. At the same time, the 100 and 200 SMAs converge around 1.0800 with modest downward slopes. Finally, technical indicators have bounced from oversold levels, maintaining upward slopes yet within negative levels.

EUR/USD is bullish in the 4-hour chart, although a bearish 100 SMA rejected advances around the mentioned intraday high. The pair, however, found near-term support in a now flat 20 SMA, which limits the downside at around 1.0325. Meanwhile, technical indicators crossed their midlines, maintaining their firm upward slopes well above them.

Support levels: 1.0370 1.0325 1.0280

Resistance levels: 1.0430 1.0475 1.0510