EUR/USD has recovered from its six-week low of 1.1589, trading around 1.1610 in the Asian session on Friday. The 14-day Relative Strength Index (RSI) stands at 35, indicating a neutral-to-bearish trend, with initial resistance noted at the nine-day Exponential Moving Average (EMA) of 1.1648.
Technical analysis reveals that EUR/USD remains below both the nine-day and 50-day EMAs, maintaining a bearish outlook. The short-term EMA is positioned lower than the medium-term one, limiting rebounds while bearish pressure persists if the pair stays below the short-term EMA.
Potential Downside Risks
Downside risks target support near 1.1589; a drop below could lead to 1.1468, the level since August 2025. On the upside, breaking the nine- and 50-day EMAs at 1.1648 and 1.1673, respectively, could relieve pressure, enabling a test of the high at 1.1808 recorded on December 24.
The heat map illustrates percentage changes among major currencies against each other. The base currency is from the left column, while the quote currency is from the top row. Euro shows a 0.05% rise against the US Dollar today. The author of the analysis is a Forex Analyst based in New Delhi, providing detailed insight into market trends.
The EUR/USD is showing significant weakness, hovering just above its six-week low at 1.1610. Key technicals like the Relative Strength Index are leaning bearish, suggesting that the recent downward momentum is likely to continue. We see the price is trading below important moving averages, which often act as a ceiling and reinforce a negative short-term outlook.
Fundamental Factors Impacting Currency Trends
This dollar strength is underpinned by recent fundamental data, as U.S. inflation for December 2025 came in slightly hotter than forecast at 3.4%. Consequently, Federal Reserve officials have signaled little urgency to cut interest rates, providing a strong tailwind for the dollar. This reminds us of a similar period in late 2024 when policy divergence led to sustained dollar gains.
Meanwhile, the Eurozone economy is flashing warning signs, with the latest manufacturing data from December 2025 showing a persistent contraction. This has fueled market expectations that the European Central Bank may be forced to consider interest rate cuts in the second half of the year. The widening gap between the Fed’s and ECB’s policy outlook is a primary driver weighing on the euro.
For derivative traders, the focus in the coming weeks should be on the 1.1589 support level. A sustained break below this price would be a strong signal to consider strategies like buying put options or selling futures contracts. Such a move would open up the possibility of a decline towards the 1.1468 lows that we last saw in August 2025.
Conversely, any upward price movement is likely to meet heavy resistance around the 1.1648 to 1.1673 zone. We would view a rally that stalls in this area as a potential opportunity to initiate new bearish positions. A break above this ceiling would be needed to neutralize the immediate downward pressure on the pair.
