EUR/USD nears two-week lows with ECB interest rate decision on tap

• EUR/USD ticks up to 1.1800, but remains near two-week lows.
• The Euro bounced up from lows as German Factory Orders rose above expectations.
• Investors are focusing on the ECB, which is expected to hold interest rates later on Thursday.

The Euro is practically flat on Thursday, trading around 1.1800 at the time of writing after bouncing from levels near two-week lows, at 1.1777. A mild risk aversion is underpinning the US Dollar (USD), but the positive surprise on German Factory Orders has provided some support to the Euro, ahead of the European Central Bank's (ECB) monetary policy decision.

Equity indexes in the US and Asia have gone through significant declines, and most European indexes are set to open negatively. Quarterly earnings results by US tech giants have increased concerns about the aggressive spending on Artificial Intelligence (AI), triggering a risk-off market mood that boosts demand for the safe-haven USD.

Data from the US was mixed on Wednesday. The ISM Services Purchasing Managers' Index showed better-than-expected results, but the employment sub-index disappointed, increasing concerns about the labour market, as the ADP Employment Change report showed a poor net job creation in January.

In the Eurozone economic calendar, the main focus on Thursday is the ECB, which is widely expected to leave monetary policy unchanged. Before that, Eurozone Retail Sales data might provide some distraction to traders, while in the US, Initial Jobless Claims and the JOLTS Job Openings will attract attention.

Daily Digest market Movers: All eyes are on the ECB

• The Euro remains on the defensive on Thursday, ahead of the ECB's interest rate decision. The central bank will, almost certainly, leave borrowing costs on hold, but investors will be attentive to changes in the rhetoric, as the recent Euro strength is raising concerns about potential deflationary effects. Any dovish hint might send the Euro to fresh lows.
• In the US, the ISM Services PMI confirmed that business activity kept expanding at a solid pace in January, with the index showing a steady 53.8 reading, against market expectations of a mild slowdown to 53.5. The strong activity, however, is not boosting demand for labour, as the Employment Index eased to 50.3 from 51.7 in December.
• Previously, the US ADP Employment Change report had raised alarms about the health of the labour market. Data from January revealed that private sector employment rose by a mere 22K, well below the market consensus of 48K, while December's reading was revised down to 37K from previous estimations of 41K.
• On Wednesday, German Factory Orders beat expectations with a 7.8% jump in December, against expectations of a 2.2% contraction. In November, industrial orders rose 5.7%, revised up from 5.6%.
• Later on the day, Eurozone Retail Sales are expected to show a 0.2% contraction in December, offsetting the previous month's 0.2% increase.
• In the US, Initial Jobless Claims are expected to show an increase to 212K in the week of January 30, up from 209K in the previous one
• Later on, the US JOLTS Job Openings are forecast to show a mild increase to 7.2 million in December, from 7.146 million vacancies in November.

Technical Analysis: EUR/USD remains pinned near the 1.1775 resistance area

The EUR/USD pair consolidates losses with support at 1.1775 in the bears' focus. The Moving Average Convergence Divergence (MACD) histogram is practically flat, highlighting a neutral momentum, but the Relative Strength Index (RSI) wavers near 40, indicating a bearish-leaning tone.

A confirmation below the mentioned 1.1775 area (February 2, 3 lows) opens the path towards the January 23 low, at 1.1728, and the January 22 low, at 1.1670. On the upside, immediate resistance is at Wednesday's high, near 1.1840, and the previous support area, near 1.1900 (close to January 28, 29 and 30 lows).

(The technical analysis of this story was written with the help of an AI tool.)