EUR/USD traded lower Tuesday as China nL1N33L02D and German nZRN005QSV PMIs along with German HICP nAPN0SCOTE fueled slower global growth worries, which helped rally the safe-haven dollar, but the pair's up trend may have only been dealt a minor blow as U.S. data risks loom.
EUR/USD pierced the rising trend line off the Nov.
11 daily low before bouncing as risk-on sentiment intensified, which suggests the overnight EUR/USD drop may not be sustainable.
December ISM manufacturing PMI USPMI=ECI, non-farm payrolls USNFAR=ECI and average hourly earnings USAVGE=ECI could have a big impact on the dollar.
PMI is expected to drop from November's report and fall deeper into contraction territory while non-farm payrolls and average hourly earnings are expected to fall below November's results.
Should the data come in below the lowered estimates U.S. rates and the dollar are likely to fall as investors will expect a less hawkish Fed stance and pull forward their expectations for a policy pivot.
Disappointing U.S. data could drive EUR/USD above key 1.0775/1.0800 resistance, which would trigger stop buying.
EUR/USD longs would then target the 50% Fibo of 1.2349-0.9528 followed by 1.1075/1.1125 resistance.
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