EUR/USD ticks up to levels near 0.9800 as the US dollar eases

• The euro bounces up from the 0.9740 area to approach 0.9800.
• The greenback lost steam on the back of weak services activity data.
• EUR/USD seen at 0.93 in 12 months – Danske Bank.

The euro has trimmed losses on Thursday’s US trading session, bouncing up from the 0.9740 area to reach 0.9795. The pair, however, remains negative on the daily chart and trading nearly 3% down on the week.

The dollar pulls back on disappointing US data

Business activity in the US services sector expanded at a slower pace than expected in October, according to the ISM PMI, which has declined to 54.4 from 56.7 in September, beyond the 55.5 expected by the market.

Beyond that, the employment gauge has dropped to 49.1, entering levels consistent with a contraction, from 53.0 in the previous month while the new orders sub-index retreated to 56.5 from 60.6, revealing the uncertainty in the economic conditions.

These figures have weighed moderately on a hitherto strong dollar, which has been rallying across the board following Wednesday’s Federal Reserve’s monetary policy decision.

The Fed hiked rates by 0.75% for the fourth consecutive time, as widely expected, and suggested that interest rates might peak at higher levels than markets had expected. Fed President Powell’s hawkish comments dampened expectations of a dovish pivot in December and boosted the dollar and US Treasury bonds.

EUR/USD seen at 0.9300 in 12 months – Danske Bank

Currency analysts Danske Bank see the pair on the defensive amid the Fed’s hawkish stance, and point out to a 0.93 target: “Markets took the FOMC statement dovishly, but the move faded during the press conference and EUR/USD declined below pre-meeting levels while 2y UST yield rose around 6 bps. We maintain our forecast for EUR/USD at 0.93 in 12M.”

Technical levels to watch