The EUR/USD rate is currently positioned between 1.1760 and 1.1780, having struggled to break through the 1.1800 to 1.1808 range in the previous week. The price is currently consolidating following a robust rally in December, amidst very low liquidity typical of the year-end period. On the macro side, three Fed cuts in 2025 have lowered the funds rate to 3.50%–3.75%, while futures continue to price in two to three additional cuts in 2026. This trajectory maintains downward pressure on real yields and, in a structural sense, limits the upside potential of the USD during rallies. Simultaneously, markets are responding to a variety of geopolitical developments. Trump’s remarks indicating that a Ukraine peace deal is “a lot closer” support the EUR by mitigating war risk in Europe; however, rising tensions surrounding China–Taiwan increase demand for safe-haven assets, bolstering the USD. With Trump’s renewed global tariff push and discussions of a potential recession, EUR/USD finds itself navigating a landscape influenced by a softer rates environment and intermittent risk-off movements that provide temporary support for the dollar. Low trading volumes during the holiday season intensify the impact of each headline, explaining why a 30–40-pip fluctuation near 1.1760 can occur with relatively minor news developments.
The US Dollar Index is currently positioned near the 98.00–98.10 range, showing signs of stabilization following a rebound from the support level of 97.73–97.80. The 2-hour chart indicates a delicate recovery: the 50-EMA is positioned near 98.12, serving as the initial resistance, whereas the 100-EMA, located around 98.55–98.60, represents the more significant barrier. The movement is constrained by the 38.2% Fibonacci retracement of the previous decline near 98.12, explaining why upward efforts falter in that region. If DXY can surpass 98.25, the next target is 98.55, and beyond that, a move toward 99.00 remains a possibility. Inability to surpass 98.25 maintains the possibility for a subsequent examination of 97.75. For EUR/USD, a DXY rejection at 98.25–98.55 indicates a potential rebound back above 1.1800. Conversely, a decisive break higher in the index could exert downward pressure on the pair, targeting 1.1700 and possibly lower levels. The EUR is supported by a comparatively less dovish ECB, in contrast to a Fed that has already implemented a 75 bps cut in 2025 and is indicating additional easing in 2026. Market expectations indicate a minimum of two Federal Reserve rate cuts in the upcoming year, whereas the European Central Bank is adopting a more measured approach. The ongoing policy divergence explains why EUR/USD remains positioned near a three-month peak just above 1.1800, even with a robust DXY around 98.00.
The growth in the Eurozone is underwhelming; however, the interplay of sluggish US labor markets, a 4.3% annualized US GDP perceived as unsustainable by markets, and ongoing political risks in the US continues to exert medium-term pressure on the USD. The current environment suggests that significant declines in EUR/USD towards 1.1700 are more likely to draw in buyers instead of initiating a trend reversal, unless there is a substantial change in macro data or the Federal Reserve’s stance shifts clearly towards a tighter policy approach. The EUR/USD pair has experienced a downturn for four straight sessions, retreating from a high just above 1.1800 (approximately 1.1805–1.1808) to the present level around 1.1760. This represents a managed retracement, rather than a downturn. The pair continues to operate within an ascending channel on the 2-hour and 4-hour charts. On the 2-hour view, it appears that buyers are consistently protecting the lower boundary of that channel near 1.1750. Every decline into the 1.1750–1.1760 range attracts buyers, reinforcing its status as short-term support. On the 4-hour chart, the retracement appears to be a typical pause following a robust rally, rather than indicating the beginning of a new downtrend. Provided the pair maintains its position above 1.1750, the most favorable trajectory continues to be upward.
The daily chart for EUR/USD continues to exhibit a bullish sentiment, even in light of the recent pullback. The price remains above the nine-day EMA, currently advancing past 1.1757, alongside the 50-day EMA positioned at 1.1673. The nine-day EMA is positioned above the 50-day EMA, a setup that typically suggests a robust uptrend, with the quicker average serving as dynamic support. Momentum indicators validate that perspective. The 14-day RSI is currently at 63.9, positioned above the 50 midline. Although it has decreased from overbought levels, it remains firmly within bullish territory. This transition from above 70 to the low 60s is precisely what one seeks in a bullish trend that is moderating its pace without faltering. The pair is currently positioned on an ascending trendline established since mid-December, hovering around 1.1755; this line represents the critical threshold that distinguishes between mere consolidation and a more significant correction. Analyzing the intraday framework, EUR/USD is currently confined within a support range of 1.1750–1.1760 and a resistance range of 1.1805 to 1.1850. The lower boundary of the ascending channel aligns with the nine-day EMA and the 1.1755 trendline, indicating that market participants are closely monitoring this range. On the topside, the initial resistance is positioned at 1.1800–1.1805, where price experienced a halt on December 16 and 24.
The upper channel line and a previous projection zone intersect around 1.1850, representing the logical short-term target should buyers reestablish dominance. A break above 1.1850 would redirect attention to the 1.1863 Fibonacci extension of the December rally, followed by the significant high-time-frame zone between 1.1918 and 1.1930, marking the peak level since June 2021. Below current levels, the nearest support is identified within the 1.1750–1.1757 range, which includes the trendline and the nine-day EMA. A decisive daily close below 1.1750 would signal the initial indication that bulls are relinquishing control of the short-term structure. If that break occurs with DXY exceeding 98.55, downside risk emerges toward 1.1700, where the lows from December 17–19 are clustered. The subsequent technical reference point is the 50-day EMA at 1.1673. As long as EUR/USD remains above 1.1673, the overarching uptrend from mid-December continues to hold true. A clean break below 1.1670–1.1673 would indicate a shift in the current structure, potentially leading to a deeper correction and reintroducing the 1.1589 three-week low as a significant medium-term support level. From a bullish perspective, a rebound from 1.1750–1.1760 that surpasses 1.1805 brings the recent three-month high at 1.1808 into focus almost immediately. Upon surpassing that band, the channel top near 1.1850 and the 1.1863 Fibonacci extension present themselves as the rational objectives for momentum traders. If macro data and Fed communication persist in endorsing the notion of additional US easing in 2026, while the ECB remains relatively cautious, EUR/USD could have the potential to extend towards the 1.1918–1.1930 range. The area signifies the most robust resistance observed since mid-2021, which is expected to draw considerable profit-taking upon initial contact. This week, we are considering this as an extension target rather than a base case. However, it remains pertinent for positioning into early 2026, assuming that support levels are maintained.