EUR/USD is hovering around the 1.1700 level, with neither party asserting dominance. The pair has rebounded from the 1.1658–1.1660 support band, reached intraday highs near 1.1735, and has consistently struggled to maintain levels above the 1.1740 area. On short-term charts, price is fluctuating between approximately $1.1710 and $1.1728, with current values lingering around $1.1690–$1.1710, aligning with the overarching 1.17 handle theme: the market acknowledges the support level, yet does not incentivize late buyers beyond the resistance point. This range is not arbitrary. The 1.1658–1.1680 area aligns with a nearly four-week low and a previous base, while the 1.1735–1.1755 range encompasses multiple technical barriers: the 100-hour simple moving average, a 50% Fibonacci retracement of the 1.1808–1.1660 decline, and a short-term trendline that has constrained every upward movement since late December. The unsuccessful attempt to breach $1.1740, coupled with the retreat to $1.1710, indicates that there remains significant supply above, despite demand holding firm on the lower end. On the dollar side, the macro environment is evidently less robust than the earlier “king USD” period. The US Dollar Index is experiencing its second consecutive day of losses, currently trading near 98.20 following a rejection close to 98.85. The index remains above a support level around 98.15; however, the sentiment has transitioned from assertive strength to a more measured consolidation phase. The catalyst was subpar US manufacturing data. The ISM Manufacturing PMI for December decreased to 47.9, falling short of the previous 48.2 and below the anticipated 48.3. The data indicates a third consecutive month of contraction, marking the weakest reading observed in approximately 14 months. New orders registered at 47.7, remaining well below the 50 expansion threshold, while the Prices Paid component remained elevated at 58.5, indicating that disinflation is neither straightforward nor consistent. The employment sub-index remains entrenched in the mid-40s, while the overall PMI lingers below 50, casting doubt on the growth narrative supporting the USD. The dollar is not collapsing; however, the narrative has shifted from “resilient US exceptionalism” to “industrial drag with lingering inflation.” This change presents a less favorable environment for a sustained USD rally against the EUR.
Current policy expectations suggest a resistance to an unchecked USD. Federal Reserve officials are candidly recognizing the transition. A prominent regional president characterized inflation as subsiding and the existing policy stance as “neutral,” while cautioning that the unemployment rate might “pop” higher. Markets have interpreted this combination—slower inflation, softer growth, and increasing jobless risk—as a situation where additional aggressive hikes are no longer feasible, and cuts later in 2026 are viewed as a plausible option. Simultaneously, the pricing associated with the European Central Bank suggests that the significant efforts regarding rate reductions in the Eurozone are predominantly completed for the time being. Market participants are progressively concluding that the ECB has completed its rate cuts, thereby stabilizing the short-end yield differential. When one central bank appears to be moving towards easing (the Fed) while the other remains steady (the ECB), EUR/USD typically establishes a support level instead of declining in a direct manner. This policy asymmetry is moderate, not dramatic, yet it holds significance around $1.17. This illustrates the reason behind the buying interest around the $1.1658–$1.1680 range and the unsuccessful efforts to push EUR/USD below $1.1655 to date.
The Euro data presents a mixed picture; it is not particularly favorable, yet it does not signal a dire situation either. The Eurozone HCOB Services PMI for December has been adjusted downward to 52.4, a revision from the preliminary figure of 52.6, following a reading of 53.1 in November. That indicates a distinct decline in momentum within the most significant sector of the economy. Services continue to show expansion, remaining above the 50 mark; however, the trend is downward, and this decline impacts the euro’s growth premium. The upcoming release of Germany’s preliminary Harmonized Index of Consumer Prices is poised to be a significant factor, potentially influencing the next movement in EUR/USD near the 1.1700 mark. The monthly HICP is projected to recover by 0.4% following a significant decline of -0.5%, with the annual rate anticipated to decrease to 2.2% from 2.6%. A 0.4% month-over-month rebound indicates that the previous negative reading was an anomaly; however, the decline in year-on-year inflation maintains headline price pressure in proximity to the target. The combination for the pair indicates that the ECB lacks a compelling reason to adopt a hawkish stance once more, yet there is also no pressing need to implement further cuts. Should the 2.2% YoY consensus be validated, the euro is unlikely to experience a significant upside surprise; however, it also steers clear of an undershoot that would warrant a more aggressive easing trajectory. That presents a compelling case for EUR/USD maintaining a wide range between 1.1650 and 1.1800 instead of experiencing a downturn.
The macroeconomic landscape in the US presents a dichotomy, characterized by underperforming manufacturing sectors alongside relatively robust services. ISM manufacturing remains at 47.9, reflecting three consecutive months of contraction. In contrast, the preliminary S&P Global Services PMI for December is reported at 52.9, a decrease from 54.1, yet it continues to indicate expansion. The current data suggests a mixed economic landscape: manufacturing sectors are facing challenges, while service industries are experiencing a slowdown that is not severe. The significant event risk is positioned later this week with Nonfarm Payrolls. Markets are preparing for a softer, yet not catastrophic, jobs report. If NFP and the unemployment rate support the “slowing but not crashing” narrative, the outlook for the US Dollar Index around 98.20 appears to be sideways to lower, particularly if additional Fed speakers reinforce the notion that policy is at or slightly above neutral. The analysis for EUR/USD suggests a potential for two-way volatility within a defined range. A stronger-than-expected NFP could push the pair down toward $1.1660 and potentially re-test $1.1620 or $1.1590 if the market begins to adjust for a more hawkish Fed. A disappointing jobs report, on the other hand, could potentially drive EUR/USD past $1.1755 and revisit the $1.1805–$1.1808 range.
Currently, EUR/USD is operating within a narrow range, exhibiting distinctly defined boundaries. On the downside, buyers have consistently entered the market between $1.1658 and $1.1680. The band aligns with a four-week low and previous congestion levels. Below that, 1.1620 and 1.1590 are the next significant horizontal supports where prior consolidation took place. On the topside, the first serious barrier is 1.1735–1.1755. At approximately $1.1735, there exists a convergence of the 100-hour simple moving average and the 50% retracement level of the decline from $1.1808 to $1.1660. The 1.1740 area has already rejected price once, leaving long upper wicks that indicate supply. Above $1.1755, focus turns to $1.1765 and the prior swing high at $1.1808, where a reverse trendline and December’s peak converge. Structurally, shorter-term charts indicate a compression between an ascending trendline originating from the November lows and a descending cap established from late-December highs. The formation appears to be a broad triangle, characterized by a sequence of higher lows starting around $1.1658 and lower highs capped at approximately $1.1808. Until one side breaks, the market will persist in fading extremes—selling near $1.1755–$1.1800 and buying near $1.1660–$1.1680. Momentum indicators validate the narrative of a “range with a mild bullish tilt.” On the 1-hour chart, the MACD has crossed into positive territory and is edging higher, suggesting that upside momentum is strengthening following the bounce from $1.1660. The Relative Strength Index on that timeframe is approximately 59, sitting comfortably above the mid-line yet not in overbought territory, indicating a likely steady progression rather than a sudden surge. On the 4-hour chart, the RSI continues to be constrained below 50, remaining in a neutral-to-negative range. The broader movement from $1.1808 continues to exert downward pressure, despite the positive impulse observed in the very short term. The mixed signal aligns with expectations typical of the midpoint within a range: intraday traders identify a long setup from $1.1700, whereas swing traders remain cautious about the potential for another test toward $1.1660 should the data underperform. The movement in price near $1.1700 indicates that tension. Every decline toward $1.1700–$1.1710 attracts buyers, while every advance toward $1.1735–$1.1740 encounters sellers. Until MACD and RSI show a bullish alignment across both intraday and higher timeframes, EUR/USD is expected to struggle with a clean trend; it will continue to penalize late entries at the extremes.