The Euro (EUR) briefly gained momentum earlier on Monday, supported by better-than-expected preliminary December PMI data from the Eurozone. However, Scotiabank’s Chief FX Strategist, Shaun Osborne, highlights the challenges in maintaining upward momentum amid persistent market concerns.
Key Highlights
- Eurozone PMI Data Provides a Boost
- French and German Services PMIs came in stronger than expected, pushing the Eurozone Services PMI to 51.4, a notable improvement of over two points from November.
- Despite this positive data, the Euro has struggled to hold onto gains, weighed down by lingering trade concerns.
- Moody’s Downgrades France
- Late Friday, Moody’s unexpectedly downgraded France’s sovereign credit rating from Aa3 to Aa2, adding to market jitters.
- This caused a slight widening of the Bund/OAT spread (the difference between German and French bond yields), which later narrowed back to Friday’s closing levels.
- EUR/USD Fails to Break Above 1.05
- The Euro remains stuck within its December trading range.
- Intraday price action suggests a bearish bias, with another rejection at levels above 1.05.
Technical Outlook
- Support: 1.0450–1.0460 remains a critical zone.
- Resistance: Immediate resistance is seen at 1.0535–1.0540.
- Bias: Intraday momentum indicates downside pressure, keeping the Euro vulnerable unless it can break decisively above 1.05.
Conclusion
While the Euro received a lift from stronger PMI data, the lingering effects of Moody’s credit downgrade for France and trade-related concerns have dampened enthusiasm. For now, EUR/USD appears trapped in its range, with bearish sentiment capping gains above 1.05.
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