EUR/USD Edges Higher as Markets Watch Eurozone, U.S. Data

Key Moments:

Euro Edges Higher Ahead of Key Eurozone Prints

The Euro (EUR) gained slightly against the U.S. Dollar (USD) for the second session on Wednesday. EUR/USD hovered just above 1.1830 at the time of writing. The pair recovered from weekly lows near 1.1775 as traders await Eurozone HCOB Services PMI and preliminary HICP inflation data for January. These releases will guide market participants on the next directional move.

Consensus expects Eurozone consumer price growth to stay below the European Central Bank’s (ECB) 2% target. This outcome would likely keep interest rates unchanged on Thursday. However, weaker-than-expected inflation could raise expectations for future rate cuts, weighing on the Euro.

Policy Backdrop and U.S. Developments

The U.S. Dollar remained broadly stable. Meanwhile, President Trump signed a bill ending the two-day government shutdown, easing short-term political uncertainty. Markets also welcomed Kevin Warsh’s nomination as the next Federal Reserve Chair. Warsh is seen as cautious on rate cuts and committed to central bank independence.

On the data front, traders will watch the final Eurozone Services PMI release for insight into services-sector momentum. In the U.S., the ADP Employment Change report gains importance since the official Nonfarm Payrolls are delayed.

Euro Performance Against Major Currencies

The Euro showed relative strength against several major peers, especially the Japanese Yen. A heat map of currency changes highlights EUR/JPY as the strongest pair today, while EUR/USD recovered from weekly lows near 1.1775 toward 1.1830.

Daily Digest: Factors Driving the Euro

• The Euro is staging a tentative rebound but still trades below last week’s highs. Traders are awaiting Eurozone inflation data to refine ECB policy expectations.
• Preliminary HICP for January is expected at 1.7% YoY, down from 1.9% in December. Core HICP is projected at 2.3% YoY.
• Eurozone Producer Price Index may show a 2.3% YoY drop in December, following a 1.7% decline in November. This suggests that the Euro is contributing to disinflation.
• The final Eurozone HCOB Services PMI is expected at 51.9, the weakest level in four months, down from 52.4 in December.
• In the U.S., January ADP private payrolls are projected to rise to 48K from 41K in December, still modest.

Technical Perspective: Resistance Levels Still Intact

EUR/USD is extending recovery from Monday’s low at 1.1775. The 4-hour MACD line is close to crossing above the signal line, suggesting weakening bearish momentum. Meanwhile, the RSI has climbed just below 50, indicating a neutral-to-bullish shift.

Despite momentum improvement, price remains within Monday’s range. For a clear trend shift, EUR/USD must break through the weekly peak around 1.1875. A further move above that level could open resistance near the January 29 high at 1.1995 and the 1.2000 psychological barrier.

On the downside, support lies near the February 2-3 lows at 1.1775. A deeper drop could attract sellers toward the January 21 low near 1.1660.

Eurozone Services PMI: Indicator Overview

The Services PMI, released by S&P Global and Hamburg Commercial Bank (HCOB), tracks business conditions in the Eurozone services sector. As services form a large share of economic activity, the index serves as a key gauge of overall health.

Surveys of senior executives indicate changes in conditions from the previous month. Values above 50 signal expansion, while below 50 indicate contraction, affecting expectations for the Euro.

Eurozone HICP Inflation: Indicator Overview

The Harmonized Index of Consumer Prices (HICP), published by Eurostat, measures changes in prices across the Eurozone. A harmonized methodology allows comparisons across countries.

YoY HICP readings compare prices to the same month last year. Stronger readings typically support the Euro, while weaker outcomes can weigh on the currency.