EUR/USD remains stable around 1.1650 after enduring five consecutive days of losses. The 14-day RSI is at 39, indicating a loss of momentum rather than an oversold market.
The daily chart suggests that the EUR/USD pair is below both the nine- and 50-day EMAs, with the short-term average at 1.1696 and the 50-day at 1.1680. Although the crossover is positive, the lack of moving-average support leaves the near-term outlook uncertain.
Potential Testing of Six Week Low
The pair might test the area near the six-week low of 1.1589. A daily close below this level could pave the way for the next support around 1.1468, the lowest since August 2025.
Resistance is initially at the medium- and short-term averages of 1.1680 and 1.1696. Closing above these levels could boost the pair towards the three-month high of 1.1808, seen on December 24, followed by 1.1918, the highest since June 2021.
Various currencies have shown slight percentage changes against each other, indicating minor fluctuations in the forex market. These currency pair movements display understated shifts, with several currencies experiencing minor depreciations.
Potential Increase in Price Swings
We saw the EUR/USD struggling around 1.1650 in the final days of 2025 as momentum faded. This weakness has been reinforced by this week’s US Non-Farm Payrolls report, which showed a stronger-than-expected 210,000 jobs added in December. This data keeps the Federal Reserve on a hawkish path, strengthening the dollar.
The bearish technical signals we noted at the end of the year, like the RSI dropping to 39, remain highly relevant. With the pair still trading below the key 1.1680 and 1.1696 moving averages, the path of least resistance appears to be lower. Traders should watch the 1.1589 support level, which was the low from early December 2025, as a key test.
Compounding this pressure is the latest Eurozone flash CPI data, which showed inflation unexpectedly falling to 1.8%. This reduces any pressure on the European Central Bank to tighten policy, creating a clear policy divergence with the Fed. This fundamental backdrop makes selling rallies a potentially viable strategy in the near term.
In this environment, we see value in strategies that benefit from a further decline or sideways movement. Buying put options with strike prices below 1.1589 could be considered, targeting the August 2025 low around 1.1468. Alternatively, selling call spreads above the 1.1808 resistance level takes advantage of time decay and the low probability of a sharp reversal.
We have seen similar periods of policy divergence in the past, such as in 2014-2015, which led to sustained dollar strength. Implied volatility in EUR/USD options may rise as the pair approaches these critical support levels. Traders should be prepared for a potential increase in price swings if the 1.1589 level is breached decisively in the coming weeks.
