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The euro is showing limited movement on Thursday. In the European session, EUR/USD is trading at 1.0895, up 0.10%.

Eurozone PMIs, released on Wednesday, pointed to trouble in the manufacturing and services sectors. Manufacturing has been in deep-freeze, although the January manufacturing PMI improved to 46.6, up from 44.4 and above the consensus estimate of 44.8. Manufacturing PMI hasn’t posted a reading over 50, which indicates growth, since June 2022. The upswing in the January reading may be misleading since the sharp drop in the delivery times index due to tensions in the Red Sea boosted the headline number.

The services sector, which dominates economic activity, dropped to 48.4, down from 48.8 in December and shy of the consensus estimate of 49.0. This marked a six straight contraction in services activity. German PMIs were slightly lower, at 45.4 for manufacturing and 47.6 for services.

ECB expected to hold rates

Against this background of weak economic activity, the ECB makes its first rate announcement for 2024 later today. The ECB has pushed back against rate cut expectations, despite a weak eurozone economy and the sharp drop in inflation. The central bank has kept the benchmark rate at 4.0% since September and has likely ended its rate-tightening cycle but is in no rush to start chopping rates. The markets have been much more aggressive and have priced in 140 basis points in cuts, with the first cut expected in the summer.

The ECB will very likely pause once again at today’s meeting, and investors will be keeping a close eye on the rate statement and ECB President Lagarde’s follow-up press conference. Will Lagarde push back hard against rate cut fever, as she did at the previous meeting? If not, expectations of a rate cut will rise and the euro could come under pressure as a result.

EUR/USD Technical

• EUR/USD is testing resistance at 1.0888. Above, there is resistance at 1.0929
• There is support at 1.0843 and 1.0802

In the new Monthly Economic Report, the Japanese Government continues to observe that the economy is "recovering at a moderate pace", even though it's "pausing in part". A significant shift in this report is the revised perspective on exports, now viewed as "appearing to be pausing for picking recently". The report also calls for heightened vigilance regarding the economic repercussions of the 2024 Noto Peninsula Earthquake.

Apart from the change in export assessment and the earthquake's impact, the report's overall tone remained consistent with previous evaluations. Key economic indicators such as private consumption is characterized as "picking up", although business investment appears to be "pausing". Industrial production is also showing signs of recovery.

The report paints a positive picture of corporate health, noting improvements as a whole. The employment scenario reflects positive trends, with signs of ongoing improvement. Lastly, consumer prices have been identified as "rising moderately"

Full Monthly Economic Report of Japan here.

German Ifo Business Climate fell from 86.3 to 85.2 in January, below expectation of 86.7. Current Assessment Index fell from 88.5 to 87.0, below expectation of 88.6. Expectations Index fell from 84.2 to 83.5, below expectation of 84.9.

But sector, manufacturing rose from -17.4 to -16.0. Services fell from -1.7 to -4.9. Trade fell from -26.7 to -29.7. Construction fell from -33.5 to -35.9.

Ifo said, sentiment among German companies has deteriorated further at the beginning of the year. The German economy is "stuck in recession".

Full German Ifo release here.

• WTI futures break above crucial trendline and 50-day SMA
• Next target is the 61.8% Fibo, which held strong in January
• Momentum indicators tilt to the positive side

WTI oil futures (March delivery) had been on the retreat since their September peak of 95.02, breaking below consecutive support zones. Although the price managed to halt its retreat and erase some of its losses, the 61.8% Fibonacci retracement of the 64.20-95.02 upleg has rejected further advances.

If bullish pressures persist, oil might challenge the 61.8% Fibo of 75.97, a level that curbed the price’s recovery in December. Conquering this barricade, the bulls could attack the 50.0% Fibo of 79.61. Further upside moves could then stall around the 38.2% Fibo of 83.25.

On the flipside, should the price reverse back below its 50-day simple moving average (SMA), the 78.6% Fibo of 70.80 could act as the first line of defence. A successful break below that zone could pave the way for the 66.95-68.00 support range defined by June lows and the recent six-month bottom. Failing to halt there, the price may face the 2023 low of 64.20.

In brief, WTI oil futures have been steadily gaining ground in the near term, attempting to extend their short-term recovery. For that to happen, the price needs to initially jump above the crucial 61.8% Fibo of 75.97.

WTI oil remains at the front foot and trading near one-month high, posted on Wednesday, after release of crude inventories report.

Much stronger than expected drop in US crude stocks, mainly caused by bad weather, added to existing bullish near-term structure and lifted the price above pivotal Fibo barrier at $75.04 (61.8% of $79.57/$67.70 descend).

Fundamentals remain supportive as the latest data added to bullish stance, driven by supply concerns over the war in the Middle East, though technical studies on daily chart are overbought and positive momentum is fading, which signals that bulls may run out of steam soon and pause for consolidation.

Bulls eye initial targets at $76.16/77 (Dec 26 high / Fibo 76.4%) which guard more significant barrier at $77.42 (200DMA).

Converged 10/55DMA’s ($73.72/78) are about to for a bull-cross and provide solid support which should contain dips and keep larger bears in play.

Res: 76.16; 76.77; 77.42; 78.13.
Sup: 75.04; 74.22; 73.72; 72.79.

Daily Pivots: (S1) 187.07; (P) 187.78; (R1) 188.42; More...

GBP/JPY is extending the consolidation pattern from 188.90 and intraday bias stays neutral. Further rally is expected as long as 186.14 resistance turned support holds. On the upside, break of 188.90, and sustained trading above 188.63 will confirm up trend resumption. Next target is 38.2% projection of 155.33 to 188.63 from 178.32 at 191.04. However, break of 186.14 will turn bias to the downside for deeper pullback.

In the bigger picture, up trend from 123.94 (2020 low) in in progress. Medium term outlook will stay bullish as long as 178.32 support holds. Next target is 195.86 long term resistance (2015 high).

Daily Pivots: (S1) 160.01; (P) 160.54; (R1) 161.10; More...

Intraday bias in EUR/JPY stays neutral as consolidation from 161.84 is still in progress. Further rally is expected as long as 158.55 resistance turned support holds. On the upside, break of 161.84 will resume whole rally from 153.15 to 161.8% projection of 153.15 to 158.55 from 155.06 at 163.79, which is close to 164.29 high.

In the bigger picture, price actions from 164.29 medium term top are seen as a correction to rise from 139.05 only. As long as 148.48 resistance turned support holds (2022 high), larger up trend from 114.42 (2020 low) is expected to resume through 164.29 at a later stage.

Daily Pivots: (S1) 0.8539; (P) 0.8551; (R1) 0.8565; More...

EUR/GBP's decline is still in progress despite loss of downside momentum. Intraday bias stays on the downside. Current fall from 0.8713 is part of the larger down trend. Deeper decline should be seen to 0.8491 low, and then 0.8464 projection level. On the upside, above 0.8591 minor resistance will turn intraday bias neutral and bring consolidations again.

In the bigger picture, fall from 0.8764 is seen as another leg in the whole down trend from 0.9267 (2022 high). Outlook will stay bearish as long as 0.8713 resistance holds. Break of 0.8491 will target 61.8% projection of 0.8977 to 0.8491 from 0.8764 at 0.8464.

Daily Pivots: (S1) 0.9372; (P) 0.9410; (R1) 0.9430; More...

EUR/CHF's break of 0.9404 minor support suggests rejection by 55 D EMA (now at 0.9447). Intraday bias is back on the downside for deeper pull back. But downside should be contained above 0.9252 low to bring rebound. On the upside, above 0.9471 will resume the rebound from 0.9252, as a correction to whole decline from 1.0095. Next target will be 38.2% retracement of 1.0095 to 0.9252 at 0.9574.

In the bigger picture, medium term outlook remains bearish as long as 0.9683 resistance holds. Current fall from 1.2004 (2018 high) is part of the multi-decade down trend. Another decline is in favor after rebound from 0.9252 completes. However, firm break of 0.9683, and sustained trading above 55 W EMA (now at 0.9659) will argue that EUR/CHF is already in a medium term rally, even as a corrective move.

• EURUSD rebounds off 200-day SMA
• But, remains beneath the rising trend line
• Technical signals are mixed

EURUSD finds strong support at the 200-day simple moving average (SMA), which overlaps with the 1.0845 barrier. The pair is currently holding beneath the medium-term ascending trend line but the fact that it is still above the aforementioned support is raising optimism for a  potential upside move.

However, the technical oscillators are showing mixed signals in the market. The RSI is ticking slightly higher in the negative region, while the MACD is extending its bearish momentum beneath its trigger and zero lines.

In the event the pair re-activates its uptrend, the next target will be the 50- and then the 20-day SMAs around 1.0920. Even higher, the bulls might head for the 1.1000 psychological number, which has been a key resistance over the last three weeks ahead of the 1.1140 high.

On the downside, the 1.0845 support has been guarding selling forces over the past week. Hence, a step beneath that line might produce fresh negative volatility, likely squeezing the price towards the 1.0725 hurdle. Another defeat there could add more fuel to the bearish wave, bringing the 1.0655 barrier immediately under the spotlight.

Overall, EURUSD is moving horizontally in the very short-term timeframe and any movement beneath the 200-day SMA could switch the bigger outlook to a bearish one.