- New orders in the US fell to their lowest level in just over two and a half years in December.
- S&P Global’s flash US Composite PMI Output Index dropped to 44.6 this month.
- Both the Fed and the ECB signaled more rate hikes to come.
Today’s EUR/USD outlook is bullish as investors digest poor economic data. Over the past 36 months, new orders have hit their lowest level in December, severely slowing US corporate activity, while softer demand notably lowered inflation.
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S&P Global’s flash US Composite PMI Output Index tracked the manufacturing and services sectors, which dropped to 44.6 this month from a final reading of 46.4 in November. The index stayed below the 50 level, which denotes a private sector contraction for the sixth consecutive month.
The Fed’s aggressive rate hikes are hurting the economy. However, the labor market is still strong since employers are reluctant to fire employees after having trouble filling positions during the COVID-19 crisis years.
The US central bank increased its policy rate by half a percentage point on Wednesday and forecasted further rises in borrowing costs of 75 basis points by the end of 2023.
Fed Chair Jerome Powell stated last week that the Fed will continue to raise interest rates in 2023 despite the economy possibly entering a recession.
Although the European Central Bank slowed the rate at which it raised interest rates, it emphasized that further tightening was still to come as it battled rogue inflation.
EUR/USD key events today
There won’t be any key economic reports from the US or the Eurozone, so the pair might consolidate.
EUR/USD technical outlook: Bulls look to the channel resistance
EUR/USD has been trading in a bullish channel, with the price bouncing off the channel support and resistance levels. Currently, the price is bouncing off the channel support and the 1.0580 key level. It has also pushed back above the 30-SMA, with the RSI above 50, showing bulls are back in control.
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With this in mind, we might conclude that the bullish move will continue until the price reaches the channel resistance. This would mean breaking above the 1.0670 resistance level. The bullish move will only continue if the price stays above 30-SMA.
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