EUR/USD begins the week positioned around 1.1633–1.1634, nearly identical to its trading level on 10 December; however, the trajectory to this point has been distinctly unfavorable. At the beginning of last week, the pair was securely positioned above 1.1700, trading near 1.1720, until sellers aggressively intervened. On Monday, the cross declined to 1.1685, unable to establish any lasting recovery, and Tuesday’s rise to 1.17445 was swiftly reversed. By late Thursday, the 1.1640 band faced persistent pressure, and on Friday, the pair momentarily reached lows near 1.16165, concluding the week close to the lower end of the range rather than experiencing a rebound. The observed behavior is significant: EUR/USD had a distinct chance to rally following the US data release but ultimately closed near its low, indicative of typical bear-control price action rather than a neutral movement. The pair’s return to just above the 1.15890–1.16150 support zone, after relinquishing the gains made earlier in the week, indicates a market sentiment that views rallies above 1.1700 as selling opportunities rather than a foundation for a new upward trend.
Flow data reinforces what the spot chart is already indicating. On 7 January 2026, FXE recorded a $5.396 million outflow in a single day, approximately 1.30% of its $414.45 million assets under management. This does not represent a capitulation event; however, for a currency ETF, it signifies a significant one-day redemption. It clearly indicates that a portion of US-listed investors is decreasing their direct exposure to the euro. When you consider spot EUR/USD steadily declining toward 1.16, it conveys a clear indication: institutional investors are not significantly increasing their positions at this time; instead, they are reducing exposure or at the very least, managing risk. The occurrence of this outflow, coinciding with a three-month EUR/USD performance of approximately +0.26% – essentially flat – indicates that this is not a result of forced selling following a downturn, but rather a calculated choice to withdraw after a lackluster, aimless quarter. When positioning shifts in such a manner while the price remains stable or slightly declines, it generally indicates that investors are skeptical about the sustainability of the recent euro strength and choose to withdraw before volatility reemerges.
Currently, EUR/USD is positioned within a distinctly outlined short-term range. On the downside, the market has already tested the 1.16165 area intraday, and traders are monitoring 1.15890 as the next significant level within the current speculative range. On the topside, last week’s high around 1.17445 and the earlier 1.17200 area represent the ceiling that bulls were unable to reclaim for over 12 hours at a time. The micro-structure within that band is clear and uncomplicated. The 1.16400 zone, which faced persistent pressure on Thursday, now serves as a pivot point: prolonged trading beneath this level drives the pair toward 1.1615–1.1590, while any rebound that fails to convincingly close above 1.1700–1.1720 will be viewed as another shorting opportunity. Last week illustrated this dynamic precisely: rapid increases, succeeded by more substantial and sustained selling pressure. The key macro development is that US jobs data did not align with the expected patterns of foreign exchange theory. Non-Farm Payrolls saw an increase of 50,000 jobs, falling short of the anticipated 60,000. Earlier in the week, ADP employment reported a rise of just 41,000, accompanied by a softening in job openings. Under typical circumstances, such a cooling labor profile, coupled with an unemployment rate near 4.4%, is likely to exert downward pressure on the dollar as markets anticipate a more dovish stance from the Federal Reserve. In contrast, the USD gained strength, resulting in EUR/USD concluding the week close to its lows rather than its highs. This indicates two key points. Initially, the market is not interpreting weaker jobs figures as a simple dovish signal; attention is directed towards overall risk sentiment and inflation, rather than solely on headline NFP shortfalls. Second, there is a risk-off element in play: when macro and geopolitical uncertainty rise, capital can rotate into the dollar simply because it is the deepest funding and reserve currency, even when the data would argue for a slower Fed. The geopolitical landscape presents challenges for the euro while favoring the dollar.
The interplay of political pressure in Iran, ongoing protests, and a generally unstable environment in the Middle East has heightened the demand for traditional safe-haven assets. Gold is currently maintaining strong levels around $4,510 after rebounding from the $4,260 region, and this is mirrored in the EUR/USD’s inability to gain traction when the opportunity presented itself. When gold approaches record highs and consistently maintains its position above critical support levels, it indicates a market prepared to invest in safeguards against potential policy errors, geopolitical disturbances, and concerns regarding economic growth. Such an environment has historically benefited the USD in comparison to the EUR, as US assets maintain their appeal as a safe haven, whereas the euro continues to face risks associated with political and fiscal fragmentation within the currency area. The consolidation of gold’s strength above $4,500, rather than a retreat to previous levels, indicates that risk-averse flows remain active. Historically, these flows do not typically support a long position in EUR/USD. Futures positioning introduces an additional dimension. Recent CFTC EUR non-commercial net longs are currently at approximately 162.8K contracts, an increase from 157.5K in the prior report. Speculative accounts continue to maintain a net long position in euros, with a modest increase observed in the current environment. It is crucial to note that the market is not short on EUR; the situation is still reversed. When you align that with the spot price movement – EUR/USD declining from 1.1720 to 1.1616 while speculators maintain long positions – the risk appears to be skewed. If macro and geopolitical stress endure and the dollar maintains its appeal as a safe haven, long EUR positions may serve as a catalyst for another downward movement as stop losses activate beneath 1.1600. Currently, there are no indications of a drastic sell-off; however, the interplay of extended positions, ETF outflows from FXE, and weakening price trends implies that the forthcoming major adjustment is more inclined to be a long liquidation rather than a new surge in EUR purchases.