The EUR/USD pair has reversed its recent trend of higher highs and lows, falling to a fresh weekly low of 1.0273. This decline raises questions about the pair’s ability to sustain its recovery from the monthly low of 1.0224, particularly given its muted reaction to recent U.S. economic data.

EUR/USD Trends and Market Sentiment

EUR/USD’s latest pullback coincides with a rebound in the Relative Strength Index (RSI) from oversold territory, although the exchange rate remains below its 50-day Simple Moving Average (SMA) of 1.0541. The pair’s inability to climb back above the 2023 low of 1.0448 (a key Fibonacci extension zone) signals continued bearish pressure.

The ADP Employment report for December, which showed a weaker-than-expected 122,000 job increase (against forecasts of 140,000), had little impact on the exchange rate. Meanwhile, Federal Reserve Governor Christopher Waller’s comments that inflation is progressing toward the Fed’s 2% goal and the likelihood of further rate cuts in 2025 have not provided significant support to the euro.

Outlook Ahead of Non-Farm Payrolls Report

The upcoming U.S. Non-Farm Payrolls (NFP) report is expected to show a 154,000 job increase for December. A stronger-than-expected result could boost the U.S. dollar, encouraging the Federal Open Market Committee (FOMC) to pause its rate-cutting cycle. Conversely, a disappointing NFP figure might weigh on the greenback, increasing pressure on the Fed to ease monetary policy further.

Key Technical Levels for EUR/USD

The exchange rate is at a critical juncture, with the following levels in focus:

• A break below the monthly low of 1.0224 could prompt a retest of the 1.0200 level, with further declines potentially targeting 0.9950.
• On the upside, EUR/USD would need to break and close above the 1.0448–1.0480 zone to challenge the 50-day SMA at 1.0541. A sustained breach could open the path to the 1.0580–1.0610 region.

Broader Implications for the Eurozone and Dollar

Should the U.S. economy continue to display resilience, the Federal Reserve might maintain a hawkish tone despite ongoing rate cuts, which would likely favor dollar strength. In contrast, any signals of economic weakness could bolster EUR/USD by pressuring the Fed to act more aggressively.

EUR/USD traders should monitor upcoming U.S. economic releases, including the NFP report, for further guidance. Until then, the pair may consolidate near its recent lows, with the potential for increased volatility as January progresses.