The EUR/USD is currently experiencing a corrective bounce rather than indicating a trend reversal. The pair has bounced back from the 1.1575–1.1600 support area and is attempting to find stability around 1.16–1.1640. However, the overall trend remains negative as long as the price remains below 1.1640, 1.1655, and importantly, 1.1695–1.1740. Clearly defined levels indicate potential short-term downside risks. Immediate support is positioned at 1.1584, which is the recent low. Following that, the psychological level of 1.1500 comes into play, with a stronger band identified around 1.1470–1.1400, marked as crucial for bearish sentiment. On the topside, resistance levels are positioned at 1.1640, 1.1650, 1.1655, 1.1680, 1.1695, and subsequently at 1.1740–1.1800. Every rally into this cluster should be approached with caution as the macroeconomic conditions and positioning dynamics are unfavorable for the euro. The market is currently navigating a range within a downtrend: short-term traders are seeking to capitalize on the 1.1575–1.1600 support for potential rebounds, while medium-term participants are on the lookout for new selling opportunities between 1.1640 and 1.1700, provided that EUR/USD does not manage to close decisively above 1.1695–1.1740. From a technical perspective, EUR/USD is currently confined within a bearish corrective channel on the short-term charts. The price is currently positioned beneath a descending trendline and is trading below the 50-day EMA, as well as the 100-day and 200-day simple moving averages. This scenario reflects a traditional bearish setup, with the 100-day SMA situated below the 200-day SMA, and the spot price remaining below both averages. The alignment indicates that the prevailing trend remains downward, despite intraday charts reflecting short-term recoveries.
The recent upward movement serves as a fundamental examination of the established Fibonacci resistance levels. Following the decline from the 1.1800 region to the 1.1584–1.1600 range, the primary retracement levels are positioned near 1.1640–1.1655. The 38.2%, 50%, and 61.8% retracements are concentrated within a tight range (~1.1640–1.1655), coinciding with the descending trendline and adjacent horizontal resistance. The specified area represents a classic technical resistance level, providing an opportunity for sellers to re-engage with minimal risk exposure. Momentum indicators are currently in a state of “correction, not breakout.” The Stochastic has reversed direction from oversold conditions, while the RSI is rising from low levels towards the midpoint. Both signals indicate a potential relief bounce from 1.1584–1.1600; however, neither provides confirmation of a trend change as long as the price remains below the moving averages and the Fib confluence. Should any of the Fibonacci levels in the range of 1.1640–1.1655 hold, the primary scenario suggests a new decline targeting 1.1550–1.1500 and possibly extending to 1.1470–1.1400. A decisive break above the trendline and a daily close above the 61.8% retracement near 1.1655, followed by 1.1695–1.1740, would indicate that bears are losing control. The tactical setups derived from the levels illustrate the current division within the market. One group is aiming to acquire EUR/USD close to robust support levels, while the other is strategizing to capitalize on strength as it approaches resistance.
On the long side, a clear strategy is in place: purchasing in the range of 1.1530–1.1550, aiming for a target of 1.1800, and setting a stop-loss close to 1.1470. The outlined structure presumes that the 1.1500 level serves as both a psychological and technical support, while anticipating that the overall dollar narrative will weaken sufficiently to allow EUR/USD to revisit the upper segment of the recent range. On the short side, attention is directed towards the resistance band: initiating sales at 1.1700, aiming for a target of 1.1500, with a stop-loss set at 1.1780. The trade is consistent with the current downtrend, reflecting the bearish moving average setup and the resistance zone ranging from 1.1680 to 1.1740–1.1800. Both playbooks exhibit internal consistency; however, they operate on distinct time horizons. The buy-the-dip participants are attempting to capitalize on a corrective squeeze from approximately 1.1530–1.1600, aiming for a move toward 1.1740–1.1800. Meanwhile, trend followers are poised for EUR/USD to reach the peak of its bounce within the 1.1640–1.1700 range. Considering the prevailing macroeconomic indicators and positioning signals, the second camp appears to have structural advantages supporting its stance. The euro component of EUR/USD does not present a strong growth narrative. Germany’s economy, a central pillar of the Eurozone, achieved a growth rate of approximately 0.2% in 2025. This figure aligns precisely with forecasts, yet it hovers just above the threshold of stagnation. Significantly, the previous year’s performance has been adjusted downward: the 2024 GDP estimate has been revised from -0.2% to -0.5%, highlighting the tenuous and delicate nature of the recovery. Inflation in Germany is showing signs of a quicker decline than earlier anticipated. Final CPI data is anticipated to reveal a decrease in annual inflation from 2.3% to 1.8% in December. The decline appears favorable initially, yet it prompts unsettling inquiries regarding domestic demand and the potential for the Eurozone’s largest economy to veer into a low-growth, low-inflation scenario.
For EUR/USD, this combination of 0.2% GDP growth, a -0.5% revision for the prior year, and 1.8% inflation indicates constrained potential for a prolonged euro bullish trend. The situation maintains pressure on the European Central Bank to adopt a cautious stance, reinforcing the idea that a robust tightening cycle is not on the horizon. In an environment where rate differentials and growth spreads are significant, the EUR finds itself at a structural disadvantage compared to the USD over medium-term perspectives. The political landscape presents a significant challenge for the euro. The U.S. administration has declared a 10% tariff on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the UK, effective 1 February. There is a distinct warning that these tariffs could escalate to 25% in June if an agreement regarding the Greenland issue is not reached. Europe is considering a response valued at approximately €93 billion in counter-tariffs and additional trade measures. The magnitude of such retaliation would deepen the rift across the Atlantic and adversely affect the export-oriented sectors that are crucial to the Eurozone’s economic expansion – including automobiles, machinery, chemicals, and high-end consumer products. The current conflict presents a dual challenge for the EUR in relation to the USD. The outlook for European growth is further dimmed, already characterized by weakness and a strong dependence on external demand. Secondly, it compels investors to adopt a “risk-off” stance, generally preferring USD and U.S. Treasuries in comparison to European assets.
The euro is currently influenced by the perception that Europe is responding rather than setting the agenda. The ongoing uncertainty surrounding tariffs, discussions on sovereignty, and the disjointed responses within the EU contribute to a risk premium on the euro. This is evident in the EUR/USD’s struggle to maintain gains above the mid-1.16s, despite several intraday recoveries. The prevailing sentiment worldwide has evidently transitioned into a more risk-averse stance. Equities are facing downward pressure, while gold has risen to levels exceeding $4,660–$4,680 per ounce. Additionally, there has been an increase in volatility in rates and foreign exchange as traders attempt to navigate a more chaotic trading landscape. Typically, this trend is clear for EUR/USD: diminished risk appetite generally negatively impacts high-beta currencies while bolstering the USD as the leading reserve asset globally. The current situation presents a more complex scenario as the tariff shock targets Europe specifically, leading markets to scrutinize the potential long-term effects on the U.S. economy. The US Dollar Index has recently been observed in the range of 99.14–99.20, experiencing a decline following tariff-related news as market participants reevaluated the potential impact on U.S. trade and economic growth. Support is concentrated around the 99.00–99.05 range, aligning with the ascending 50-period EMA on the shorter-term charts. Meanwhile, resistance levels are established at 99.46, 99.67, and the 99.85–100.00 zone. The current structure indicates a dollar that is stabilizing instead of declining, with potential for further gains if risk aversion continues and the support band remains intact.
The EUR/USD pair finds itself influenced by two opposing forces. On one side, the EUR faces challenges due to sluggish growth, disappointing data from Germany, and direct exposure to tariffs. Conversely, the USD encounters its own macroeconomic uncertainties; however, it continues to gain from safe-haven inflows and a comparatively advantageous policy flexibility. The outcome is a pair that finds it challenging to maintain an upward trajectory and often retreats from resistance levels such as 1.1640–1.1700, even in the face of generally unfavorable news for the dollar. Anticipations regarding the Federal Reserve, employment statistics, and the USD component of the spread. The U.S. policy backdrop serves as a significant factor bolstering the USD in comparison to the EUR. Recent labor market data has led to a reassessment of expectations regarding additional rate cuts from the Federal Reserve. The current market assessment indicates approximately a 95% likelihood that interest rates will stay the same during the FOMC meeting scheduled for January 27–28, 2026. The postponement of the next cut, supported by strong employment data, contributes to maintaining U.S. yields at a relatively higher level compared to those in the Eurozone, where economic growth is sluggish and inflation is trending down to 1.8%. With rate differentials continuing to favor the dollar, medium-term investors are more inclined to maintain their positions in USD-denominated assets rather than pursue rallies in EUR/USD. For the pair, this indicates that each effort to exceed 1.1640, 1.1655, and 1.1695 encounters a consistent structural barrier: the Fed retains the capacity to remain patient, whereas the ECB has significantly less flexibility to implement substantial tightening. The interplay of that spread dynamic, alongside the tariff shock and geopolitical risk, clarifies why the rebounds from 1.1575–1.1600 appear corrective rather than impulsive.