## EUR/USD Breaks Below 1.1700 Support, Signals of Weakening European Growth Strengthen

European currencies came under pressure on Tuesday, with EUR/USD falling over 0.28% to 1.1690, away from the early session high of 1.1742. This decline broke the previous upward trend, shifting market focus to strong signals of economic slowdown in the Eurozone, especially as German inflation continues to decline, falling below 2%, suggesting that the European Central Bank(ECB)'s easing cycle may have come to an end.

### Weak European Data Drag Down the Euro

The Eurozone services PMI index became the main factor suppressing the currency. According to HCOB data, the December Eurozone services PMI fell to 52.4 from the initial 52.6, also weaker than the previous month's 53.1. This indicates that business activity is losing momentum. Meanwhile, Germany, the largest economy in Europe, saw inflation year-over-year decline from 2.6% to 2%, just hitting the European Central Bank's target level. Analysts believe that, amid threats to economic growth, the ECB may have completed its policy adjustments unless economic data show more severe deterioration.

### Mixed US Data, Fed Diverges in Stance

Meanwhile, US economic data show mixed signals. The S&P Global December services PMI dropped from 54.1 to 52.5, and the composite PMI also declined from 54.2 to 52.7, indicating that economic expansion continues but at a slowing pace. Statements from Federal Reserve officials also reveal differing policy orientations: New York Fed President Stephen Miran(Stephen Miran) remains dovish, suggesting the central bank should continue to cut rates and that a total of up to 100 basis points of cuts may be needed by 2026. In contrast, Richmond Fed President Thomas Barkin(Thomas Barkin) adopts a neutral to hawkish stance, emphasizing that current interest rates are at neutral levels, and decision-making requires "fine-tuning," with a focus on both employment and inflation. This internal divergence within the Fed reflects differing judgments among policymakers about the economic outlook.

### US Dollar Index Attempts Rebound but Faces Weak Momentum

The US Dollar Index(DXY) rose 0.25% to 98.61 on Tuesday, attempting to reverse the previous day's decline, but gains were modest. This reflects that while the dollar has support, in the context of sluggish global economic growth, it lacks sustained upward momentum. Gold prices continued to rise, further indicating that market risk appetite remains low.

### Technical Outlook: EUR/USD Needs to Hold Key Support

From a technical perspective, Tuesday's decline has shifted the EUR/USD technical pattern from a moderate uptrend to a moderate downtrend. If the price fails to close above 1.1700, the euro will face further downside pressure. The recent support level is the 100-day moving average(SMA) at 1.1663, just 20 points away. If broken, next support levels are the 50-day moving average at 1.1639 and the 200-day moving average at 1.1553. Conversely, to resume the rally, bulls need to first break above the 20-day moving average at 1.1729, then target resistance levels at 1.1750 and 1.1800.

### Next Week's Data Schedule: Dense Release of US and European Economic Data

The EU statistical office will release December harmonized consumer price index(HICP) revised figures, Italy's inflation data, and German retail sales data. On the US side, traders should pay attention to ADP employment data, ISM services PMI, JOLTS job openings, and speeches by Federal Reserve officials, all of which will significantly influence the subsequent currency movements. According to Fed Skin(Fed Skin), market expectations for rate cuts will be recalibrated based on these data and speeches.