The EUR/USD pair is currently positioned between 1.1750 and 1.1760, consistently testing a level that has historically rejected price movements several times since the end of the third quarter. This is a systematic issue of congestion. The convergence of a 2025 high-week close (1.1747–1.1755), a 61.8% retracement of the September pullback, and the upper boundary of the medium-term advance that began from the 2025 lows is noteworthy. The price is maintaining its position, showing no signs of breaking. The significance of that distinction cannot be overstated. Markets that remain beneath resistance without experiencing a sell-off are accumulating energy rather than dispersing it. The European Central Bank maintained its rates in December, yet the communication conveyed was more impactful than any potential adjustment could have been. The message was clear: there is no prior commitment to easing, decisions will be based on data, and policy will be assessed on a meeting-by-meeting basis. The significance of that language lies in its subtle elimination of the near-term easing tail risk, which had constrained EUR/USD for the majority of 2024. President Christine Lagarde emphasized that advancements in inflation do not necessarily lead to reductions in interest rates. The market reaction has been fundamentally driven, rather than driven by speculation: the euro has ceased to sell during rallies and has begun to support pullbacks above 1.16.
On the U.S. side, the downward pressure on the USD is influenced by factors beyond just inflation data. The source of this issue is institutional uncertainty. President Donald Trump has explicitly expressed a desire for a Federal Reserve chair who is more accommodating to lower interest rates when Jerome Powell’s term concludes in May. Markets assess not the individuals involved, but the risk associated with their credibility. The prospect of the next Fed chair adopting a distinctly dovish stance has begun to compress the USD risk premium, occurring prior to the initiation of any formal nomination process. The reason EUR/USD rallies are not being aggressively faded is due to the elevated levels observed. Futures markets indicate approximately 50 basis points of Federal Reserve cuts anticipated in the near term, while the European Central Bank is showing a growing expectation for policy stability extending into much of 2026. The significance of that narrowing differential outweighs the importance of absolute rate levels. Historically, the EUR/USD pair does not require a hawkish stance from the ECB; it merely necessitates a decline in the relative dominance of the Fed. The pair is currently indicating this shift at 1.1750. The inquiry is not about the existence of divergence — it is present — but rather if it is adequate to trigger a regime shift above the 1.1800–1.1875 range.
On the daily chart, EUR/USD is positioned significantly above the 100-day EMA at approximately 1.1635, which is exhibiting an upward slope. The moving average has served as a dynamic support level during each corrective attempt since mid-November. The momentum indicates a solid structure: the RSI around 59–60 is favorable, not overextended. This is the area where trends continue to develop, rather than change direction. It is crucial to note that momentum has remained aligned with price, which is a significant difference from Q3, when attempts for upward movement were diminishing alongside a declining RSI. Bollinger Bands have significantly contracted, with the mid-band positioned at approximately 1.1738, which aligns closely with the current spot price level. This represents a typical energy compression following a directional shift, rather than indicating exhaustion. The upper band is positioned close to 1.1820. A daily close above 1.1820 would signify a significant volatility release, which has historically led to measured extensions ranging from 120 to 180 pips in this pair.
Taking a broader view, the weekly framework indicates that EUR/USD is approaching a significant resistance area at 1.1747–1.1775 — a range characterized by the high-week close for 2025, the 61.8% retracement level of the decline observed in September, and the upper limit of the 2025 progression. Market declines do not occur from this type of structure without an initial breach of support levels. The support level is established between 1.1497 and 1.1505, a range characterized by the highs from March 2020 and 2022, as well as the 78.6% retracement of the advance observed in July. Provided that 1.1500 remains intact, this represents a temporary halt in an upward trend, rather than a distribution phase. On the monthly chart, EUR/USD increased over 17% from the yearly lows, approaching a multi-year resistance band at 1.1917–1.2020. The designation of that zone is based on specific criteria. This is characterized by the complete extension of the 2022 advance, the 38.2% retracement level of the 2008 decline, and the upper parallel of the 2022 pitchfork. The price remains below this band without breaking through, indicating a period of consolidation. Current monthly momentum has reached its peak since 2021, a period that typically signaled exhaustion only following a parabolic increase, rather than after a phase of consolidation. This suggests the presence of continuation risk rather than a complete collapse. A monthly close above 1.2020 should not be viewed as a mere headline move; rather, it represents a significant structural event. Beyond that threshold, the chart reveals potential towards 1.2218, 1.2350–1.2414, and 1.2992. These are not immediate objectives. These are trend milestones that only become active once 1.2020 is accepted, rather than being briefly pierced.