The EUR/USD pair is currently trading within the range of 1.1610 to 1.1620, following a recent decline to a six-week low of 1.1593. This marks the end of a period during which the pair maintained levels above 1.1700 and 1.1750. The pair is positioned distinctly beneath its significant short-term moving averages on both intraday and daily charts, indicating that the past three weeks have experienced a methodical yet steady decline. Simultaneously, the US Dollar Index remains within a rising channel between 99.28 and 99.50, as the market actively assesses its ability to breach the 100.00 level. The current situation—EUR/USD constrained beneath the fractured support level of 1.1610–1.1635, while DXY shows an upward inclination—represents the fundamental truth of this market environment. The macroeconomic factors surrounding the USD narrative explain the persistent demand for the dollar. For the week ending January 10, Weekly Initial Jobless Claims decreased to 198,000, surpassing the consensus estimate of 215,000 and showing improvement from a revised figure of 207,000 from the previous week. The current labor market does not indicate a recession; rather, it is effectively adapting to restrictive policies without exhibiting signs of distress. Manufacturing indicators are showing positive signs: the New York Empire State Manufacturing Index increased to 7.7 in January from -3.7, while the Philadelphia Fed Manufacturing Survey rose significantly to 12.6 from -8.8, exceeding the anticipated -2. With claims remaining below 200k and both regional manufacturing indices shifting from negative to distinctly positive territory, the market lacks motivation to anticipate early, aggressive cuts from the Fed, which inherently benefits the USD in comparison to the EUR.
The divergence in rate expectations distinctly separates the two currencies. The pricing of Fed funds futures indicates approximately a 95% likelihood of no action during the late-January FOMC meeting, with the initial feasible 25 basis point cut now anticipated for June, rather than the previously considered January or April timelines. That indicates that “higher for longer” is not merely a slogan; it is integrated into the pricing curve. In Europe, the current state of inflation and growth appears sufficiently subdued to warrant considerations for earlier easing measures. German HICP, serving as the benchmark for the region, has reverted to the ECB’s 2.0% year-over-year target for December, down from 2.6% year-over-year in November, with monthly inflation recorded at 0.2% following a decline of -0.5%. Given the sluggish growth and inflation meeting its target, the ECB finds itself in a position where it can, and is compelled to, implement cuts ahead of the Fed, potentially by a greater margin. The disparity in timing and magnitude is exactly what maintains yield spreads favoring USD, which explains why each EUR/USD rebound is met with selling rather than pursuit. Political dynamics and risk sentiment are not providing support for EUR/USD either. The confirmation of Jerome Powell’s continued role as Fed Chair alleviates a potential institutional concern that markets had begun to factor in. A U.S.–Taiwan trade agreement centered on semiconductors and tariffs enhances clarity on supply chains and bolsters risk appetite while maintaining the strength of the dollar. The overall outcome is a scenario in which the USD gains from robust domestic data alongside diminished policy uncertainty. In contrast, the Eurozone continues to experience subdued growth and a more cautious political environment, meaning that even with a stabilization of global risks, the euro is unlikely to be the main beneficiary. The outcome presents a scenario where DXY around 99.5 aligns with underlying fundamentals, while EUR/USD close to 1.16 signifies that reality rather than a fleeting dislocation.
The daily performance grid highlights the true extent of today’s euro “strength.” During the session, the EUR shows a modest increase of approximately 0.14% against the USD; however, it remains relatively stable or exhibits weakness against other currencies: approximately -0.10% against the GBP, around -0.20% against the JPY, slightly negative against the AUD, and about -0.37% against the NZD. The increase from 1.1593 to 1.1620 in EUR/USD primarily reflects the dollar’s pause following a robust performance, rather than a widespread reassessment of the euro. When the euro fails to assert itself across the G10 spectrum, any uptick in EUR/USD should be regarded as a corrective movement within a prevailing downtrend, rather than the onset of a lasting bullish trend. Analyzing the broader framework, EUR/USD continues to exhibit a clear downtrend. The pair has retraced from a 10-week peak exceeding 1.17, has fallen back through the 1.1700 and 1.1750 levels, and is currently positioned below a descending trendline that limits any efforts to recover. In that context, key resistance levels are identified at 1.16815 and 1.17443. As long as the price stays beneath 1.16815, the overall structure reflects a pattern of lower highs and lower lows. The moving averages on this horizon exhibit a downward slope, with the shorter-term gauge having crossed below the longer-term one, thereby affirming the presence of downside momentum rather than contesting it. Momentum indicators such as RSI are emerging from extreme oversold levels but still linger below 50, aligning with the notion of a trend that remains stable without triggering alarm.
The 4-hour chart presents a clear tactical overview. EUR/USD has breached a demand band near 1.1610 and is currently revisiting that level from a lower position. The price is currently hovering around 1.1610–1.1620, with the most recent candle indicating a rejection at 1.1623, suggesting that sellers continue to protect that area. The formation presents a descending triangle, characterized by a series of lower highs converging towards a horizontal support level established at 1.1593. The primary intraday moving averages are positioned above the current level, which strengthens the bearish sentiment. The RSI is currently positioned between 38 and 40, suggesting a state of weakness without reaching oversold conditions. This implies that there remains potential for further declines without prompting an automatic mean-reversion bounce. This represents the traditional setup where a definitive breach beneath the support level frequently triggers the subsequent downward movement. The level map surrounding the current price is narrow, and it is significant. Immediate resistance is located at 1.1620–1.1623, marking the intraday rejection zone. Above that, 1.1635–1.1636 represents a critical range: it coincides with a 20-period moving average and a local Fibonacci level, establishing it as the primary decision area for short-term traders. If bulls manage to close above that band, the subsequent resistance levels are at 1.1655, followed by approximately 1.1665 (channel top), and ultimately the more significant 1.16815 level, which distinguishes a managed downtrend from a more pronounced squeeze. On the downside, the initial support level is 1.1593, followed closely by 1.1590, which serves as an effective pivot point. The channel bottom is positioned near 1.1585. If that shelf breaks decisively, the market will likely target 1.1560 (late-November low), followed by 1.1555, and the broader support cluster around 1.15561–1.1524–1.15122. The identified cluster establishes the subsequent larger target area for any potential extension of the ongoing movement.
The DXY environment supports the bearish outlook for EUR/USD. The index is currently positioned between 99.28 and 99.50, moving within an upward channel on the 4-hour chart. The price demonstrates support from both short- and long-term moving averages, which are trending upward and affirming the bullish momentum of the USD. Critical resistance points are identified around 99.745 and subsequently at 100.024, while support levels are established at 99.000 and 98.714. The price is currently consolidating just beneath the upper trendline of the channel, indicating a degree of hesitation without suggesting a reversal. If DXY surpasses 99.745 and subsequently 100.024 with strong volume, it will pose significant challenges for EUR/USD to maintain 1.1590; market dynamics will likely drive the pair down to 1.1550 and possibly into the 1.1520–1.1512 area. Only a sustained drop in DXY back below 99.000 would significantly alleviate the downward pressure on the cross. The upcoming catalysts that may activate the range in EUR/USD are focused on the U.S. calendar. Industrial Production is expected to come in at a consensus of 0.1%, following a previous figure of 0.2%. A print significantly exceeding 0.1% bolsters the narrative of a robust U.S. economy, underpinning yields and the USD, while increasing the likelihood of a move below 1.1590. A gentle surprise could shift the dynamics, alleviating some pressure on the dollar and providing EUR/USD with another opportunity to reach 1.1635–1.1665. Subsequently, comments from Fed officials Michelle Bowman and Philip Jefferson will be analyzed for any change in tone. If both persist in emphasizing that inflation remains excessively high and that policy must stay restrictive, expectations for rate cuts will extend further into the future, solidifying the fundamental rationale for a stronger USD. Any unexpectedly dovish hint, in contrast, would serve as the initial substantial rationale for a more sustainable rebound in EUR/USD beyond the immediate resistance band.
Upon analyzing spot price, macro drivers, policy expectations, technical structure, and the event calendar, the conclusion is clear. The EUR/USD pair is currently positioned around 1.1610–1.1620, exhibiting a downtrend as it trades beneath a descending trendline. Significant resistance levels are identified at 1.1635–1.1665–1.16815, while a structural floor is established at 1.1593–1.1590. A breach of this floor would likely pave the way toward 1.1550, followed by 1.1520–1.1512. The DXY is advancing within a rising channel around 99.5, with reliable upside targets set at 99.745 and 100.024. This movement is supported by 198,000 jobless claims, manufacturing prints of 7.7 and 12.6, and a 95% market-implied probability indicating no Federal Reserve action in January. German inflation stands at 2.0% year-over-year, with a monthly change of 0.2%, providing the ECB with the opportunity to implement cuts sooner, thereby strengthening the rate divergence relative to the euro. In this setup, EUR/USD does not present a buy-the-dip opportunity. The outlook is negative, suggesting a Sell position. The recommended approach is to capitalize on any rebounds within the 1.1635–1.1665 range, while maintaining a structural invalidation point around 1.1680. Downside targets should initially focus on 1.1590, followed by 1.1550, and ultimately the 1.1520–1.1512 area if the dollar’s movement continues to decline.