EUR/USD flubs key technical levels and backslides once again

• EUR/USD failed to extend a near term technical recovery, sheds 0.4% on Tuesday.
• German Retail Sales, EU PPI inflation, US ADP jobs preview on the docket for Wednesday.
• Another NFP Friday looms ahead, crimping market momentum as Fed rate cut fears weigh.

EUR/USD turned tail and swooned against the Greenback on Tuesday, shedding four-tenths of one percent after a failed recovery of the 1.0400 handle fizzled out completely. The pair is still trading up from last week's 26-month low, but not by much. Euro bulls are in desperate need of a turnaround as Fiber continues to grind its way back toward 1.0200.

European Harmonized Index of Consumer Prices (HICP) inflation came in about as expected, with annualized HICP for the year ended in December ticking upwards slightly to 2.4% YoY from the previous 2.2%. However, most of the upward pressure in European inflation figures appears to be either baked into older numbers, or is non-structural ticket items, giving Euro traders some hope that things will continue to improve.

On the US side, ISM Services Purchasing Managers Index (PMI) business activity survey results came in much hotter than expected, as did ISM Services Prices Paid. Both figures were for the month of December, igniting fresh market concerns that the Federal Reserve (Fed) may not be able to deliver near as many rate cuts in 2025 as investors had initially hoped. 

Early Wednesday, German Retail Sales and pan-EU Producer Price Index (PPI) inflation data are set to be released, with market forecasts indicating a robust rebound in both metrics. Meanwhile, in the US, December ADP Employment Change figures and the latest Meeting Minutes from the Fed are scheduled for release during the upcoming trading session. The ADP employment figures are seen as an unreliable predictor of what Friday's Nonfarm Payrolls (NFP) data may reveal, but traders won't let that stop them from overreacting to large deviations from forecasts. Investors will be looking for any signs that could point to a potential rate cut before June, which would include a pronounced, but not too severe, softening in the labor market.

EUR/USD price forecast

EUR/USD continues to churn on the low side as the US Dollar remains the market's favored jumping-in point. The pair has shed a little over 6.5% since peaking just above 1.0900 in early November, chalking in a clean technical rejection from the 200-day Exponential Moving Average (EMA) which is now grinding its way down into the 1.0700 handle. Fiber bulls hoping to cement in a fresh bull run from multi-year lows will need to first contend with the 50-day EMA, which is descending into 1.0500.

EUR/USD daily chart