Original Article Source: “Morning Briefing: EUR/USD Has Dipped Below 1.1700” by FXStreet
Rewritten and Expanded Article: Comprehensive Forex Morning Briefing – EUR/USD Slips Below 1.1700, Dollar Strength Gains Traction
By: FXStreet Analyst (Original Author)
The global foreign exchange market witnessed significant volatility during the early hours of U.S. trading as major currency pairs reacted to stronger-than-expected U.S. data and global risk sentiment. Notably, the euro weakened against the U.S. dollar, pushing the EUR/USD pair downward below the psychologically important 1.1700 line. The movement reflects both technical pressures and macroeconomic dynamics, signaling a potential shift in the landscape as 2024 progresses.
In this extended morning briefing, we explore the recent movements across multiple major currency pairs, with a focus on EUR/USD’s dip below 1.1700. We examine key technical indicators, fundamental catalysts, and what to expect moving forward from not only the euro and dollar but also the yen, pound sterling, yuan, and other currencies impacting the global forex narrative.
EUR/USD Drops Below 1.1700: Euro Shows Weakness
The euro’s slide against the dollar continues, with the EUR/USD pair falling under the 1.1700 mark—a key psychological level that had served as recent support. The dollar’s ascent was primarily driven by a combination of positive U.S. macroeconomic data and a strengthening in U.S. Treasury yields.
Key Observations:
– EUR/USD breached 1.1700 during early Asian trade, indicating bearish momentum.
– Resistance remains firm around 1.1750–1.1775; this zone is now expected to act as a ceiling.
– Support is anticipated near 1.1675–1.1650; a clear break below this band may signal further downside toward 1.1600.
– Momentum on technical charts shows declining RSI values, suggesting bearish control.
– The German services PMI came in weaker than forecast, adding to eurozone economic concerns.
– Markets are now pricing in reduced optimism for European Central Bank (ECB) tightening.
Fundamentals weigh heavily on the euro as the European Union begins to experience slower economic growth, despite persistent inflation concerns. The divergence between ECB policy and the Federal Reserve’s more aggressive stance increases the appeal of dollar-denominated assets.
USD Strengthens Broadly: Yield Support and Rate Path Narrative
The greenback saw broad-based gains, continuing its upward trajectory amid strong U.S. economic data and increasing expectations that the Federal Reserve could delay rate cuts. Investors are placing renewed bets on economic resilience in the U.S., even as inflation shows signs of gradual moderation.
Factors Driving USD Strength:
– U.S. ISM Services Index printed at 53.9 in December, surpassing expectations.
– U.S. 10-year Treasury yield rose toward 4.00%, increasing dollar attractiveness.
– Federal Reserve officials remain cautious, emphasizing the risk of premature easing.
– Markets are rethinking timing for potential Fed rate cuts; March pricing has pulled back.
With risk appetite drifting cautiously lower, the dollar benefits from both its safe-haven status and interest rate differentials, especially against the euro and yen.
USD/JPY Rises: Yen Under Pressure
The Japanese yen is struggling to maintain stability as the Bank of Japan (BoJ) remains relatively dovish. As global yields push higher, the yield-sensitive yen continues to weaken. The USD/JPY pair edged higher, trading around 144.50, remaining well above the key 144 threshold.
Jpy-Specific Notes:
– No major shift from BoJ, which continues to support ultra-loose policy.
– Japanese 10Y government bond yields struggle to keep pace with counterparts, reinforcing carry trade preferences.
– Verbal interventions from Japanese policymakers were muted, providing no real short-term barrier to further dollar gains.
If dollar strength persists and global yields rise, USD/JPY
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