EUR/USD came under heavy bearish pressure on the first trading day of 2025 and dropped to its weakest level in over two years at 1.0224. Although the pair stages a rebound toward 1.0300 in the European morning on Friday, the technical outlook suggests that the near-term bias remains bearish.
The broad-based US Dollar (USD) strength weighed heavily on EUR/USD on Thursday. The data published by the US Department of Labor showed that the weekly Initial Jobless Claims declined to 211,000 in the week ending December 28 from 220,000 in the previous week. This reading came in below the market expectation of 222,000 and helped the USD gather strength. Additionally, the cautious market stance put additional weight on EUR/USD's shoulders.
In the American session on Friday, the ISM Manufacturing Purchasing Managers Index (PMI) data for December will be watched closely.
The headline Manufacturing PMI is expected to match November's reading of 48.4. Investors will also pay close attention to the inflation component, the Prices Paid Index, which is forecast to rise to 51.7 from 50.3. A bigger increase than expected in the inflation component could support the USD and make it difficult for EUR/USD to hold its ground heading into the weekend. On the other hand, a disappointing headline PMI could have the opposite effect on the pair's action.
The Relative Strength Index (RSI) indicator on the 4-hour chart recovered slightly above 30 from near-20 it touched on Thursday, suggesting that the bearish bias remains intact following a technical correction from oversold levels.
On the upside, 1.0300 (static level, round level) aligns as immediate resistance before 1.0350 (20-period Simple Moving Average (SMA), static level) and 1.0390-1.0400 (50-period SMA, static level). Looking south, first support could be seen at 1.0240 (static level) ahead of 1.0200 (static level, round level) and 1.0160 (static level from July 2022).
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