EUR/USD pierces the 1.1300 figure after US ISM Services PMI

• The single currency has been unable to recover from hawkish FOMC minutes, down 0.13%.
• US ISM Services PMI slowed a tick though it remains at expansionary territory.
• US Initial Jobless Claims rose by 207K, 10K more than estimations.
• EUR/USD Technical Outlook: Bearish biased though a daily close below 1.1300 could accelerate a challenge to 2021 yearly low at 1.1186.

On Thursday, the shared currency is barely flat during the day, though it trims some Wednesday gains, as market participants assess last FOMC’s meeting minutes. The EUR/USD is trading at 1.1295 at press time. 

US ISM Services PMI slowed in December

The Institute for Supply Management reported that the Services PMI in the US fell from 69.1 in November to 62.0 in December. Despite contracting, a reading above 50 indicates growth in the services sector. The contraction is likely attributed to the resurgence of Covid-19 cases, but supply constraints appear to be easing.

Before Wall Street opened, the Department of Labor reported that Initial Jobless Claims for the week ending on January 1, 2022, increased by 207K higher than the 197K foreseen by economists. The 4-week average topped 204.5K, more than the 199.75K in the prior week. In spite of rising, jobless claims hovered near a five-decade low in recent weeks.

On Wednesday, the Federal Reserve released its December minutes. The US central bank noted that monetary policy accommodation was unnecessary and that a faster reduction of its bond-purchasing program was needed before hiking rates. Moreover, Fed members began discussions of a contraction of its balance sheet, which was perceived by a hawkish signal by the markets, with investors selling stocks aggressively. US money market futures have priced in an 80% chance of a rate hike in the March 2022 meeting. 

In the meantime, the US Dollar Index, which measures the greenback’s performance against six rivals, is up 0.02%, sitting at 96.20, underpinned by rising US 10-year Treasury yields rising three and a half basis points, currently at 1.7369%.

EUR/USD Price Forecast: Technical outlook

The EUR/USD daily chart depicts the pair as downward biased. The daily moving averages (DMAs) reside well above the spot price. Given that the Relative Strength Index is at 46, under the 50-midline, it means that the EUR/USD might print a leg-down before reaching oversold conditions.

On the downside, the EUR/USD first support level would be the January 4 low at 1.1273. A breach of the latter would open the door for crucial support levels, with December 15, 2021, a daily low at 1.1222, followed by a 2021 yearly low at 1.1186.