EUR/USD holds gains ahead of Eurozone business activity figures

• The EUR/USD trades broadly steady at 1.1750, with highs of 1.1760-1.1770 in focus.
• Eurozone PMIs are expected to show a slight improvement in business activity in December.
• The EUR/USD rally starts giving signs of exhaustion.

EUR/USD remains steady near two-and-a-half-month highs on Tuesday, trading practically flat at 1.1750 at the time of writing, ahead of the release of the preliminary Eurozone Manufacturing and Services Purchasing Managers Indexes (PMIs) for December and the delayed US employment figures.

Markets are in a moderate risk-off mood. Most Asian stock markets have posted losses, and the main European equity index futures are pointing to a negative opening, which keeps Euro (EUR) bulls in check. The US Dollar Index (DXY), on the other hand, remains pinned near multi-month lows, which is keeping the EUR/USD's downside attempts limited.

During the US market session, the Bureau of Labor Statistics will release the Nonfarm Payrolls reports for October and November. These figures are expected to provide further insight into the momentum of the US labour market, although the lack of key data, which was not collected during the government shutdown, will deprive traders of the full picture.

Daily Digest Market Movers: The US Dollar remains depressed ahead of US employment data

• The Euro (EUR) remains supported near recent highs as investors continue to bet on further interest rate cuts by the Federal Reserve (Fed). The European Central Bank (ECB) is widely expected to keep rates on hold at Thursday's meeting, and might even hint at a rate hike in the second half of 2026.
• Data from the US released on Monday failed to support the US Dollar. The New York Empire State Manufacturing Index fell to -3.9 in December, below the 10.6 reading forecasted by the market and also below November's 18.7 reading.
• In the Eurozone, on the other hand, Industrial Production data beat expectations with a 0.8% growth in October, from 0.2% in September, and market forecasts of a mere 0.1% advance. Year-on-year, industrial production increased 2%, from the 1.2% growth seen in September.
• Beyond that, negotiations for a peace deal in Ukraine continue. US offered NATO-style security guarantees to Kiev after US President Donald Trump and Ukrainian President Volodymyr Zelenskyy's meeting in Berlin, which has provided some support to the Euro.
• Later on Tuesday, Eurozone Services PMI is expected to have edged up to 53.9 in December, from 53.6 in November, while the Manufacturing PMI is seen ticking up to 49.9 from 49.6 but still within levels consistent with a contracting business activity.
• In the US, Nonfarm Payrolls data are expected to show a 40K net increase in payrolls in November, with the Unemployment Rate steady at 4.4%. October's payroll figures will also be out, although the jobless rate will not be released due to a lack of data.
• At the same time, the US Commerce Department will release October's Retail Sales, which are expected to have grown 0.2%, the same pace as in September. Excluding automobiles, US retail consumption is expected to have risen 0.2%, slightly below September's 0.3% growth.

Technical Analysis: EUR/USD rally starts to give signs of exhaustion

The EUR/USD maintains its bullish trend intact, but Monday's upside attempts failed to confirm above last week's high at 1.1763, and technical indicators are pointing to a weakening momentum. The. 4-hour Relative Strength Index (RSI) is showing a bearish divergence, although still at levels within bullish territory. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator has recently crossed below the signal line, hinting at a deeper correction.

Immediate support is at the December 12 low, near 1.1720. Below that, the December 11 low at the 1.1685 area, and the December 9 low at 1.1615 will emerge as the next bearish targets. To the upside, the 1.1760-1.1770 area has capped bulls on December 11 and 15, ahead of the October 1 peak at around 1.1780. The pair has a significant resistance area here, which should be cleared to shift the focus towards the September 23 and 24 highs near 1.1820.