EUR/USD Retraces After Triple Bottom: Navigating Mixed Economic Signals

EUR/USD has once again gained after hitting a low of 1.03425. It reached an intraday high of 1.03980 and is currently trading around 1.03863.

U.S. Economic Reports Impact Currency Performance

On December 19, 2024, two important economic reports were released for the U.S. economy. The final estimate of Gross Domestic Product (GDP) for the third quarter showed that the economy grew at an annual rate of 3.1%, revised up from 2.8%, mainly due to strong consumer spending and exports. Additionally, initial jobless claims fell to 215,000, down from 228,000, indicating a strong job market with fewer people seeking unemployment benefits. In contrast, the Philadelphia Federal Reserve's Manufacturing Business Outlook Survey revealed a significant decline in manufacturing activity, with the Philly Fed Manufacturing Index dropping to -16.4, far below expectations. New orders and shipments also decreased, reflecting lower demand for manufactured goods. The employment index showed a slowdown in hiring, and while prices paid by manufacturers increased, their pricing power weakened. Overall, these reports present a mixed picture of the economy as it heads into 2025, with both positive signs and challenges in the manufacturing sector.

Technical Analysis and Market Outlook for EUR/USD

The pair remains below both short-term (34 and 55-EMA) and long-term (200-EMA) moving averages on the daily chart. Near-term resistance is at 1.0435; a breakout above this level could push the pair towards targets at 1.04635, 1.0500, 1.0550, and 1.0600. Major bullish momentum is expected only if prices surpass 1.0660, which would open the door to levels of 1.0700, 1.0760, and 1.0800. On the downside, immediate support is at 1.0340; a drop below this could lead to further declines to 1.0300 and 1.0240.

Trading Strategy: Buying on Dips

The Commodity Channel Index (CCI) indicates a bearish trend, while the Average Directional Movement Index (ADX) suggests a neutral outlook. A good trading strategy is to buy on dips around the 1.0378-80 mark, with a stop-loss at 1.03370 and a target price of 1.0500 for potential gains.