Technical Analysis
The short-term bias remains upward with the nine-day EMA positioned above the 50-day EMA. RSI at 68.90 confirms firm positive momentum, nearing overbought territory.
Immediate resistance is at 1.1918, with the next target at 1.1950 at the channel’s upper boundary. If the pair surges above the channel, it could aim for the psychological level of 1.2000.
On the downside, support exists around the nine-day EMA at 1.1770 and the channel’s lower boundary at 1.1750. A break below might test support levels at the 50-day EMA at 1.1697 and the seven-week low at 1.1589.
The Euro was the weakest against the US Dollar today among major currencies.
This analysis is from Akhtar Faruqui, a Forex Analyst from New Delhi, India.
Fundamental Analysis
Looking back at the analysis from 2025, we saw a strong bullish bias for the EUR/USD pair within an ascending channel. The Relative Strength Index was near 69, confirming the powerful upward momentum at that time. Many traders were targeting the psychological 1.2000 level.
However, the fundamental picture has shifted as we start 2026. The European Central Bank held its main interest rate at 4.50% in its last meeting of 2025, with recent data showing Eurozone inflation fell to 2.8% in December. This has led many to believe that the ECB’s next move will be a rate cut, not a hike.
In contrast, the United States economy continues to show resilience, adding a solid 210,000 jobs in December 2025. With the Federal Reserve holding its rates in the 5.25-5.50% range, the interest rate differential heavily favors the US dollar. This is a significant change from the economic convergence story we saw in early 2025.
For the coming weeks, we should consider this fundamental divergence. Buying EUR/USD put options with strike prices near the old support level of 1.1770 could be a prudent strategy to hedge against or profit from a potential downturn. This allows us to capitalize on downside moves while limiting our risk to the premium paid.
Another approach is to consider a bear put spread, which involves buying a put option and simultaneously selling another put with a lower strike price. This strategy reduces the initial cost of the position but also caps the potential profit if the pair breaks below the 1.1697 level. It is a suitable strategy if we expect a moderate decline rather than a complete collapse.
We must also remember the lessons from the 2022 energy crisis, which showed how sensitive the Euro is to external shocks. While the energy situation has stabilized compared to those years, the current economic slowdown in key Eurozone members like Germany creates a different kind of headwind. Unlike the sharp rebound we saw post-2022, this slowdown appears more structural.
