Technical Analysis

The short-term outlook is positive since the nine-day EMA is above the 50-day EMA. The RSI is at 68.90, indicating strong upward momentum and approaching overbought levels. The immediate resistance level is at 1.1918, with the next target at 1.1950, which is the upper boundary of the channel. If the price breaks above the channel, it could reach the important level of 1.2000. On the downside, support can be found at the nine-day EMA around 1.1770 and at the channel’s lower boundary at 1.1750. If it breaks below these levels, support may be tested at the 50-day EMA at 1.1697 and the seven-week low of 1.1589. Today, the Euro was the weakest currency against the US Dollar among major currencies. This analysis comes from Akhtar Faruqui, a Forex Analyst in New Delhi, India.

Fundamental Analysis

In 2025, the analysis showed a strong bullish trend for the EUR/USD pair in an upward channel. The Relative Strength Index was close to 69, confirming strong momentum at that time. Many traders aimed for the psychological level of 1.2000. However, as we enter 2026, the situation has changed. In its last 2025 meeting, the European Central Bank kept its main interest rate at 4.50%, and inflation in the Eurozone dropped to 2.8% in December. This suggests the ECB may consider a rate cut instead of a hike. Meanwhile, the US economy remains strong, having added 210,000 jobs in December 2025. The Federal Reserve’s rates are between 5.25% and 5.50%, creating a substantial interest rate advantage for the US dollar. This marks a significant shift from the economic trends observed in early 2025. In the upcoming weeks, it’s important to recognize this divergence. Buying EUR/USD put options with strike prices near the old support level of 1.1770 could be a wise strategy to protect against or benefit from a possible decline. This approach allows us to profit from downward moves while limiting our risk to the premium paid. Another strategy to consider is a bear put spread, where we buy one put option while simultaneously selling another with a lower strike price. This method lowers the initial cost of the position but also limits potential profits if the price drops below 1.1697. It’s ideal if we expect only a moderate decline rather than a significant downturn. We should also remember the lessons learned from the 2022 energy crisis, which highlighted how vulnerable the Euro is to external shocks. Although the energy situation has improved since then, the current economic slowdown in major Eurozone countries like Germany presents a new challenge. Unlike the quick recovery seen after 2022, this downturn seems more structural. Create your live VT Markets account and start trading now.

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