The EUR/USD pair is currently positioned around 1.1650, having experienced five straight days of declines. This movement has reversed the late-December advance towards the 1.1770–1.1808 range, resulting in a retreat into the lower segment of the 1.1589–1.1917 framework. The decline aligns with a strengthening US Dollar and a market adjusting to US labor data, reflecting a slower yet still robust US economy. Meanwhile, Eurozone activity remains stable at a low level, lacking a solid fundamental support for the EUR. The cross currently operates below its significant short-term averages, which have now become resistance levels. This positioning exposes the downside targets of 1.1589 and subsequently 1.1467–1.1470, contingent on US data continuing to support the USD. The dollar aspect of EUR/USD is bolstered by pre-NFP positioning and a labor market that is gradually cooling, rather than collapsing. Headline NFP expectations are positioned at approximately 60,000 jobs for December, a decrease from about 64,000 in November. However, the weekly data does not indicate weakness significant enough to compel the Fed to make an immediate dovish shift. In the week ending January 3, US Initial Jobless Claims increased to approximately 208,000, which is a slight uptick from the previously revised figure of 200,000, yet remains under the consensus estimate of around 210,000. Meanwhile, continuing claims rose to about 1.914 million from 1.858 million, indicating a gradual rise in individuals remaining on benefits rather than a sudden disruption in employment. The ADP report indicates an addition of just 41,000 private-sector jobs, while job openings decline to approximately 7.146 million, signaling a steady easing of labor demand.
Despite that, rate markets continue to indicate a strong likelihood—approximately in the mid-80% range—that the Fed will maintain current rates at the forthcoming meeting, with any cuts anticipated to occur later rather than being implemented immediately. The interplay of a slowing labor market without a crash, coupled with a cautious Federal Reserve, facilitates a gradual ascent of the US Dollar Index. DXY is positioned slightly above 99.00, with recent price movements confined within an ascending channel. Previous resistance at 98.85 is now functioning as support, reinforced by the 200-period moving average located around 98.50. The RSI, positioned in the mid-to-high 60s, indicates strength without reaching a blow-off top. Provided that the channel remains intact, the USD component of EUR/USD maintains a positive outlook, and any upward movements in the pair are expected to be met with selling rather than pursuit for higher levels. The Euro component of EUR/USD is constrained by a recovery that is stabilizing at a low level rather than gaining momentum. The European Commission’s Business Climate Index shows an improvement from approximately -0.66 to -0.56. While it remains in negative territory, it is no longer experiencing a decline. Consumer Confidence shifts from approximately -14.6 to -13.1, while the Economic Sentiment Indicator declines slightly from 97.1 to 96.7, remaining below the 100 threshold that signifies its long-term equilibrium.
The Eurozone PPI experienced a month-on-month increase of 0.5% in November, following a previous rise of 0.1% and surpassing estimates of approximately 0.2%. However, the annual rate continues to reflect a contraction at -1.7%, marking the fourth consecutive month of decline. This trend indicates that pipeline inflation pressures are predominantly alleviated, despite the recent monthly figure showing some strength. The unemployment rate decreases from 6.4% to 6.3%, marking a historically low figure for the bloc and indicating a labor market that remains stable and not under significant pressure. In this context, ECB Vice-President Luis de Guindos characterizes the current rates as “appropriate” and observes that inflation is near the target, although uncertainty remains elevated. The ECB’s consumer survey indicates that inflation expectations are approximately 2.8% for the 1-year horizon, 2.5% for the 3-year, and 2.2% for the 5-year, remaining effectively anchored just above the 2% target. The current situation allows the ECB to maintain a 2.00% policy rate without urgency to ease, yet the data lacks the strength to support any hawkish surprises. For EUR, this indicates a floor—since the ECB is not in a hurry to cut—but it does not serve as a catalyst for ongoing appreciation against a dollar bolstered by comparatively stronger growth and safe-haven demand.
On the daily chart, EUR/USD is distinctly positioned within a corrective downswing. Spot trades at approximately 1.1650, positioned beneath the 9-day EMA and 50-day EMA, which are grouped around 1.1680 and 1.1696. The cluster has transitioned from a support level to a resistance level, indicating that the bulls have relinquished control over the short-term trend. The 14-day RSI, currently around 39, suggests a decline in momentum, yet it has not entered significantly oversold levels. The pair has notably fallen below the 55-day EMA around 1.1671, a threshold that had previously provided support for the recovery from 1.1467. The break indicates that the recovery from 1.1467 toward the 1.1917 high has likely reached its conclusion, suggesting that the market is currently navigating through the third leg of a larger corrective pattern. Immediate support is positioned at the six-week low around 1.1589. A daily close beneath that level paves the path toward the 1.1467–1.1470 area, which signifies both the previous reaction low and the range consistently emphasized by various models as a rational downside target for this phase. On the topside, the initial significant resistance is the 1.1680–1.1696 EMA band. A sustained close above that area would be necessary to suggest that the corrective wave is stalling, with the next upside focus at the 1.1808 high from December 24 and then 1.1917, the highest level since mid-2021. As long as spot remains below the EMA cluster and fails to reclaim 1.1700, the bears maintain their tactical edge.
From a higher-timeframe perspective, EUR/USD continues to process the significant rise from the 0.9534 low in 2022 to the 1.1917 peak. Provided the pair remains above the 55-week EMA near 1.1408, the long-term framework continues to support the persistence of this uptrend. Any decline towards the 1.14–1.15 range should be viewed as a significant yet corrective pullback, rather than a total shift in trend direction. A clear and sustained move above the 1.2000 psychological level would indicate that the entire progression from 0.9534 is shifting into a new bullish phase, paving the way for a significantly higher trading range for EUR/USD in the upcoming quarters. Conversely, a prolonged trading phase beneath the 55-week EMA would suggest that the ascent from 0.9534 was merely a three-wave corrective bounce. The described scenario would revert the long-term outlook to bearish, positioning the 1.1400–1.1000 range as a medium-term target zone rather than a buy-the-dip opportunity. Currently, the price action continues to honor the weekly support level. Therefore, the most logical interpretation is that the long-term uptrend remains intact, a medium-term correction is underway, and short-term momentum is distinctly negative for EUR/USD. The Nonfarm Payrolls report and the US Supreme Court ruling on Trump-era trade tariffs are pivotal factors that can influence the dollar and global risk sentiment. Employment growth approaching 60,000, coupled with a slight decline in jobless claims and continuing claims, maintains the Fed’s cautious stance and bolsters the USD. A softer jobs print, particularly if paired with a lower participation rate or downward revisions, could lead to a depreciation of the dollar and provide EUR/USD an opportunity to recover above 1.1700. The tariff ruling presents two avenues of influence: a decision that potentially unlocks approximately $150 billion in reimbursement claims could unsettle risk sentiment, yet it might also be interpreted as a reprieve for trade-sensitive sectors if it indicates a movement away from the most severe tariff frameworks.
In the context of EUR/USD, risk-off episodes tend to bolster the USD more significantly than the EUR, as the dollar remains the foremost global safe haven. The implications suggest that negative equity and the credit market’s response to the ruling are likely to exert pressure on the pair. Conversely, a controlled and “orderly” outcome that enhances risk appetite may facilitate a modest recovery for the euro. As we approach 2026, projections begin to vary. In the US, expectations for rate cuts have been delayed, yet remain intact. Current discussions in the markets suggest the possibility of two Fed cuts within the year, rather than a more aggressive easing cycle. This outlook is dependent on inflation continuing to approach the target and further softening in labor data. In the Eurozone, certain scenario analyses indicate that if the ECB maintains its policy rate near 2.15% while the Fed implements more significant cuts and Eurozone growth remains robust, EUR/USD might approach the 1.20 area. However, the existing data—sub-100 sentiment indices, negative PPI year-on-year, and only modest corporate improvement—do not support that bullish trajectory at this time. Should Eurozone growth fall short of expectations and the ECB finds itself compelled to adopt a more definitive easing stance while the Fed maintains a cautious approach, the pair may trend towards 1.13 and potentially 1.10 over an extended timeframe.
Currently, the ECB indicates a preference for a range of 2.00–2.15%, while the Fed appears to be adopting a gradual and moderate easing approach. As a result, the risk dynamics for EUR/USD over the upcoming months seem to favor a downward movement towards the 1.1589–1.1470 area prior to any significant effort to reach the 1.18–1.20 range. Analyzing the macroeconomic and technical indicators, the present setup suggests a bearish or Sell position on EUR/USD, rather than maintaining a neutral Hold or pursuing an outright Buy. The pair is currently positioned around 1.1650, trading below the 9-day, 50-day, and 55-day moving averages, as well as beneath the previous resistance zone of 1.1770–1.1808. The daily RSI stands at approximately 39, indicating a lack of capitulation low signs. The current US data continues to bolster the dollar, indicating that the Federal Reserve is not in a hurry to implement cuts. Meanwhile, the fundamentals in the Eurozone remain merely satisfactory, lacking the strength necessary to fuel a prolonged rally for the euro. In this scenario, movements toward the 1.1680–1.1700 range appear to present chances to take short positions rather than levels to pursue upward, with an initial downside target at 1.1589, followed by 1.1467–1.1470 and, should selling intensify, the medium-term critical level around 1.1408. As long as EUR/USD stays under 1.1700 on a daily closing basis, the data indicates a Sell-on-strength strategy with clearly defined levels, rather than a Buy-the-dip approach.