EUR/USD: euro supported by the European composite PMI

The single currency, subject to spotty profit taking yesterday, is already rebounding, with the support of the final data of the Services PMI indicators. The component for the entire Eurozone significantly exceeded the first estimates for the month of December, coming in at 49.9 points, one iota away from the 50-point mark, which separates, as a reminder, a contraction from an expansion of the sector considered.

The synthetic data (including industry) is now available, and the monetary union posted a score of 49.2 in December, compared to 47.9 in November.

Joe Haye, Senior Economist at S&P Global Market Intelligence, offers the following insight: "The eurozone economy continued to deteriorate in Q4, but the strength of the deterioration eased for the 2nd consecutive month, tentatively indicating a contraction in the economy that may be milder than initially expected. Smaller declines were also seen across the eurozone countries, most notably in Germany, whose economy was the main drag on the eurozone as a whole in the second half of this year."

On the inflation side, the week will be particularly dense in employment benchmarks, whose degrees of tightness are a key component of the price inflation equation. Of particular interest are new job openings (JOLTS) this Wednesday, the ADP survey and weekly unemployment benefit registrations on Thursday, and culminating on Friday with the NFP report on private sector employment (excluding agriculture).

Right now, the pair is trading at $1.0617.

KEY CHART ELEMENTS

The break of the 20-day moving average (in dark blue), which until now served as a perfectly materialised trailing stop, requires us to cut our long positions, while waiting for a relevant entry point. However, no pronounced bearish reversal pattern has been identified.

MEDIUM-TERM FORECAST

Based on the key chart factors we have mentioned, our medium-term view on the EUR/USD is neutral.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.0435 and resistance at $1.0746.