EUR/USD Turning Point
EUR/USD has seen a turn on the daily chart, finding support at 1.1720 and trading above 1.1750 as the US session prepares to open. The Greenback’s recovery has slowed, with US Jobless Claims anticipated to influence the trading session during this year-end period.
The Euro is set for a 14% annual appreciation, due to differing monetary policies between the ECB and the Fed. Trade policies and a softening US economy have negatively impacted the US Dollar.
The FOMC minutes revealed varied opinions among Fed policymakers, with a 25 basis points rate cut approved by a slim margin. Further easing is dependent on inflation trends, sparking uncertainty about future rate cuts. The US Dollar increased after the minutes were released.
The US Initial Jobless Claims will attract attention, although trading volumes might stay low with market closures for New Year festivities. Markets in Japan will remain shut for the rest of the week.
The Euro’s strength is reflected in its performance against major currencies, particularly the New Zealand Dollar. The Dollar Index has dropped nearly 10% over the past year, marking its worst performance in eight years. The Fed’s rate cut decision was approved by 9 votes to 3, indicating challenges in setting monetary policy.
Further rate cuts hinge on inflation projections, with potential future cuts in 2026 and 2027. This week, the US Jobless Claims report is expected to indicate an increase in unemployment benefits applications.
Technical Insights
Technical indicators suggest EUR/USD may face resistance at the reverse trendline near 1.1770. The path towards higher levels includes the December highs, while support zones are near December 17 and 19 lows.
The Euro is the currency for 20 European Union countries, following the US Dollar in trade volume. In 2022, it accounted for 31% of forex transactions, with an average daily turnover of $2.2 trillion.
The ECB, located in Frankfurt, influences the Euro through interest rate decisions and monetary policy management. Eurozone inflation and economic data releases play vital roles in determining the Euro’s value.
Trade Balance figures also impact the Euro. Guillermo Alcala, a financial news editor and copywriter, clarifies that the information provided is not investment advice, and all mentioned data should be considered carefully.
We are seeing EUR/USD hold steady around the 1.0850 mark as 2025 comes to a close. Trading is expected to be quiet entering January, which can sometimes lead to sharp moves on low volume. This environment feels familiar to market conditions we saw several years ago during other year-end periods.
It’s a reminder of the market dynamics we observed back at the end of 2020, when the pair was trading above 1.1700, largely due to a wide policy divergence between a dovish Fed and the European Central Bank. The situation has since reversed, leading to the dollar’s multi-year strength. Now, we are watching closely for signs that this policy divergence is narrowing once again.
Market Outlook
Current data shows US core inflation has cooled to 2.5% year-over-year, while Eurozone inflation sits just under at 2.2%, tightening the spread that has favored the dollar for so long. With the Federal Reserve signaling a potential pause in its policy for 2026, volatility expectations for the first quarter may be underpriced. Options traders might consider positions that benefit from a potential breakout from the recent tight trading range.
We are watching the upcoming US Initial Jobless Claims figures, which have been consistently strong, with the latest reading for the week of December 27, 2025, at 210,000. A surprise jump in claims could accelerate bets on a Fed rate cut and send the EUR/USD higher. In the immediate term, any move toward the 1.0900 level could be a key point to watch for resistance.
While the old analysis from years past pointed to resistance near 1.1770, the key level to watch in early 2026 is now closer to the 1.0950-1.1000 psychological barrier. For those holding long-dollar positions, buying euro call options with a strike price around 1.1000 could be a cost-effective way to hedge against a sharp dollar downturn in the first quarter. This strategy protects existing positions while allowing participation in a potential euro rally.
