The EUR/USD pair has transitioned from a steady ascent towards the 1.1750–1.1800 range into a measured decline that is currently probing the 1.16 level. Following a decline to a five-week low around 1.1618, the pair experienced a recovery towards approximately 1.1698; however, any advance beyond the 1.1660–1.1700 range is facing selling pressure. The spot rate is fluctuating between 1.1640 and 1.1650, distinctly under the 1.1700 pivot that has constrained several rallies earlier in January. On the daily chart, the price is positioned below the 20-day and 50-day moving averages, with the 100-day level around 1.1660 transitioning from support to resistance. A weekly close below 1.1600 indicates that the market has shifted its perception of that level, now viewing it as a ceiling for rebounds rather than a floor. The message is straightforward: below 1.1600, sellers dominate the market until it either drops into the deeper support range at 1.1550–1.1480 or a significant event reverses the dollar’s trend. Recent Eurozone data support the market’s hesitation to accept elevated prices for the euro. Growth is decelerating, inflation is easing, and demand metrics do not compel the ECB to implement additional tightening measures. Traders often refer to a “hold phase” because current policy is not being eased significantly. However, there is also no reliable trajectory for increasing rates as GDP momentum slows and inflation moves closer to the target. On the US side, stronger-than-expected macro numbers maintain structural support for the USD. Weekly US jobless claims came in at approximately 198,000, contrasting with expectations of around 215,000. Strong consumption and generally positive activity data have dampened near-term rate-cut anticipations. The market has adjusted its timeline for the initial Fed rate cut, resulting in higher US real yields. The yield premium relative to the euro area presents a direct challenge for EUR/USD whenever the pair attempts to recover the 1.1700–1.1750 range.
The upcoming movement for EUR/USD depends on a robust macroeconomic calendar from both regions across the Atlantic. In the euro area, flash PMI surveys for German manufacturing and services will indicate to the market if the current soft patch is evolving into a more significant slowdown. If German manufacturing declines further or service activity approaches contraction, concerns about growth will likely drive the euro down, increasing the chances of a clear test of 1.1550. The Eurozone’s Consumer Price Index, particularly core inflation, continues to be of significant importance. A print significantly under expectations would strengthen the notion that the ECB may remain passive or potentially move towards rate cuts later in 2026, diminishing any remaining support for the euro. From a purely technical perspective, EUR/USD is exhibiting a measured downtrend, rather than a crash. The price has fallen below a significant horizontal level just under 1.1600, with immediate support currently identified between 1.1580 and 1.1550. A daily close below 1.1550 paves the way toward the 200-day moving average around 1.1400, identified as a significant downside magnet in multiple technical analyses.
The market is currently observing a range between 1.1700 and 1.1800 on the topside. The 100-day moving average is positioned at approximately 1.1660, with sellers gathering above that level around 1.1700, followed by 1.1730–1.1770, and ultimately 1.1800, which acts as a psychological barrier. The identified levels correspond with intraday sell zones marked at 1.1654, 1.1676, and 1.1701, where short setups have been established with tight stops positioned just above the local swing highs. The momentum indicators validate the prevailing sentiment. The daily RSI is currently positioned below 40, indicating bearish momentum; however, it has not reached an oversold condition as of yet. There is potential for additional decline toward the 1.1550–1.1480 range without necessitating an immediate return to the mean. A decisive reclaim of 1.1700–1.1750, accompanied by the RSI moving back above 50, would indicate that bears are losing their grip on the market. Short-term strategies focused on EUR/USD are consolidating at distinctly established levels. On the sell side, traders are focusing on fading bounces at levels of 1.1654, 1.1676, 1.1701, 1.1700, 1.1730, and 1.1770. They typically place stops just above the previous swing high, aiming for initial profit targets of approximately 20 pips, while allowing the rest to run towards the range of 1.1580–1.1550. On the buy side, dip-buyers are testing support levels at 1.1623, 1.1618, 1.1580, and 1.1551, with strict invalidation positioned just beneath recent lows and conservative upside targets set between 1.1750 and 1.1800. The current structure indicates that the market identifies 1.1580–1.1550 as a short-term opportunity for tactical long positions. Meanwhile, the range of 1.1700–1.1770 is recognized as the primary supply zone, where significant participants are prepared to re-enter short positions, contingent upon supportive US data and Fed pricing for the dollar.
Some desks frame the current tape as EUR/USD striving to establish a foundation within a “neutral zone” between 1.1685 and 1.1750. The rationale is that should the pair manage to maintain stability above 1.1685 and achieve closes near 1.1750, the market may begin to regard 1.1800 as a feasible target once more, possibly confirming a shift in trend from bearish to bullish. The pair must first reclaim the cluster around 1.1645–1.1698, which has limited rebounds following the most recent US inflation data. The daily RSI is currently around 42, and the MACD lines are beginning to curl upwards from lower levels, suggesting a potential corrective bounce. However, in the absence of a significant catalyst—like softer US inflation data or an unexpected hawkish signal from the ECB—these indicators may simply be noise within a larger downtrend. The USD component of EUR/USD is influenced by factors beyond mere data releases. Political and institutional narratives are influencing positioning. Accusations directed at the Fed Chair and public pressure from the US president for lower interest rates generate headline volatility; however, they have yet to alter the fundamental trajectory: markets continue to perceive the Fed as hesitant to implement aggressive cuts while growth and labor data remain robust. Upcoming at 13:30 London, the Producer Prices Index and Retail Sales represent the next immediate risk factors. A stronger-than-anticipated PPI or robust retail figures will solidify the perspective that rate reductions will occur later and in smaller increments, thereby bolstering dollar strength. That would support additional downward movement on EUR/USD toward 1.1580–1.1550. On the other hand, a negative surprise in both PPI and sales could weaken the dollar, potentially driving the pair back below 1.1660 towards the 1.17 level.
The outlook for the upcoming week shows a divergence in positioning. A prominent European institution forecasts EUR/USD to hover around 1.14 by mid-year, with a decline toward 1.10 anticipated by the end of 2026. This projection reflects an ongoing euro discount influenced by geopolitical uncertainties, diminished confidence within the Eurozone, and a prudent approach from the ECB. Within that context, movements towards 1.18–1.20 present opportunities for selling, while the market is likely to trend towards 1.10 as global risks remain complicated. Conversely, a leading financial institution anticipates that the pair will ultimately surpass 1.20, concluding 2026 at approximately 1.22. They contend that a significant portion of the recent ~10% decline in the dollar is attributed to hedging activities rather than direct sales of US assets. Additionally, they suggest that further reductions by the Fed—around another 50 basis points—coupled with fiscal measures in Europe, especially from German stimulus, will progressively shift the dynamics in favor of the euro. The outlined scenarios establish a broad range: 1.10 on the lower end, 1.22 on the upper end. The current spot around 1.16 is positioned in the lower half of the projected range, indicating that medium-term bears perceive further downside potential. Conversely, structural bulls consider these levels as a possible accumulation zone, contingent upon policy and growth data aligning with their expectations.
Geopolitics plays a crucial role in the dynamics of EUR/USD. The ongoing conflict in Ukraine, coupled with policy developments in Venezuela and the overarching tariff threats from Washington, contribute to the risk premia within the Eurozone. The actions taken by the US overseas may ease the strain on Russia’s leadership and extend the duration of the conflict. Meanwhile, business and consumer confidence within the Eurozone continues to face challenges, and the region’s capacity to take advantage of lower-priced Venezuelan oil exports remains constrained. This diminishes the euro’s attractiveness compared to the dollar, particularly given that energy risk is already factored into European inflation and trade balances. Positioning data is also significant. The euro continues to be one of the most significant long currencies in the G10 complex, as indicated by various positioning models. This indicates that there remains potential for liquidation should the macroeconomic narrative shift further negatively for Europe—providing additional support for the scenario where EUR/USD revisits 1.14 and possibly 1.10, contingent on robust US data and a cautious stance from the ECB.