EURUSD: a clear road to parity

During the previous week markets were celebrating the New Year, with only a few days spent in trading. For this reason, investors would have to wait another week or two to get the latest currently significant data related mostly to inflation. Data posted for the US include the S&P Global manufacturing PMI final for December, which was standing at 49,4 a bit higher from expected 48,3. The ISM Manufacturing PMI in December was at the level of 49,3 a bit higher from forecasted 48,4.

Data posted for the Euro Zone and Germany include HCOB Manufacturing PMI final for December, which was 42,5 for Germany and 45,1 for the Euro Zone, both in line with expectations. The Unemployment rate in Germany in December was standing at 6,1%, unchanged for the previous month.

During the first trading week of the year, the US Dollar gained in strength. The 1,04 support line remained under pressure. This represents a historically important level, whose breach to the downside would lead to eurusd parity in the coming period. Since the end of the previous year, the market was testing this level, however, the level sustained, bringing the currency pair back toward the 1,05 levels. Since there was no strength for the higher grounds, the currency pair reverted again toward the 1,04 level. During the previous week, the support line has been clearly breached, leading eurusd to the lowest weekly level at 1,023. Still, the pair is ending the week at 1,0308. With the latest move, the RSI reached its clearly oversold market side, and is currently gearing for a short reversal. The moving average of 50 days still strongly diverges from MA 200, leaving no space for a potential cross in the near term period.

By looking at the charts, it could be noted that the currency pair is on a tricky road right now. Since the end of the previous year it was clear that the 1,04 would be a target of the market in the coming period, however, it could not be predicted that the market would so swiftly turn its look toward the next support line. The last time when markets were on this territory was in November 2022. Based on these movements, charts are showing that there is no significant level between 1,024 and 1,0. This brings us to a conclusion of a high probability that the breach of 1,024 level would certainly lead toward the final parity of currencies. However, for the moment, charts are showing a potential for a short term reversal. In this sense, the level of 1,04 would be tested for one more time.

Important news to watch during the week ahead are:
EUR: HCOB Composite and HCOB Services PMI final for December in both Germany and the Euro Zone, Inflation rate in Germany preliminary for December, Inflation rate flash in December for the Euro Zone, Unemployment rate in the Euro Zone in December, Retail Sales and Factory Orders in Germany in November, Industrial Production in Germany in November, Retail Sales in the Euro Zone in November,
USD: S&P Global Composite PMI final for December, S&P Global Services PMI final in December, ISM Services PMI in December, FOMC Minutes will be posted on January 9th, Non-farm Payrolls in December, Unemployment rate in December, Michigan Consumer Sentiment