Euro/Dollar Analysis: Attempting to Form a Bullish Bottom
2026-01-14 19:34:21
On Wednesday (January 14), during the European session, the euro attempted to halt its recent decline against the US dollar for the second consecutive trading day, after previously hitting a five-week low of 1.1618. Following the release of US inflation data, the exchange rate began to rebound, reaching the resistance level of 1.1690. As of Wednesday morning, the rate was fluctuating around 1.1645. The market is currently awaiting the release of a new round of key US economic data, including the Producer Price Index (PPI) and retail sales data, both scheduled for release at 21:30 Beijing time.
The US dollar weakened again against other major currencies due to unexpected negative events in the United States. Federal Reserve Chairman Jerome Powell is embroiled in financial allegations, while President Trump pressured the Fed to lower benchmark interest rates according to the White House's wishes. However, Fed officials have expressed support for Powell and his policy proposals, temporarily halting the dollar's decline.
The outlook for US interest rate policy continues to influence the euro/dollar exchange rate.
Foreign exchange market trading data shows that the outlook for US interest rate policy remains a key factor influencing the euro's exchange rate against the US dollar. The US dollar continued to record net gains this week, pushing the euro/dollar exchange rate gradually down to the 1.16 range. Strong US economic data is enough to weaken market expectations for a near-term interest rate cut by the Federal Reserve, and financial markets are increasingly focused on whether the Fed will maintain its current accommodative policy stance or shift to tightening in 2026.
Overall, the market's reassessment of the Federal Reserve's policies is expected to be the core factor driving the euro-dollar exchange rate in the short term.
(EUR/USD daily chart source: FX678)
From a technical perspective, analyzing the daily chart, the Euro/USD pair is attempting to return to the neutral range of 1.1685-1.1750. A successful break above this range would pave the way for a move towards the key psychological resistance level of 1.1800, and also suggest a potential bullish reversal. Currently, the 14-day Relative Strength Index (RSI) is hovering around 42, gradually approaching the 50 neutral line; the Moving Average Convergence Divergence (MACD) lines are also beginning to turn upwards, awaiting new strong bullish momentum.
Conversely, for a clear downward trend to be triggered, short-selling forces would need to push the exchange rate below the key psychological support level of 1.1500.
Euro/Dollar Outlook for the Next Few Months
Against this backdrop, Crédit Agricole predicts that the euro will fall back to 1.14 against the dollar by mid-year and further to 1.10 by the end of 2026. However, ING believes that after short-term volatility, the euro is likely to break through the 1.20 mark against the dollar.
From an external perspective, recent US economic data has been mixed, but overall performance remains strong, enough for the market to price in expectations of a Fed rate cut in January. Meanwhile, evolving geopolitical tensions remain a key driver in early 2026.
In response, Crédit Agricole pointed out that US President Trump's decision to order the overthrow of Venezuelan President Maduro's regime may alleviate the negotiating pressure on Russian President Putin in the Russia-Ukraine conflict, potentially leading to a continued escalation of the conflict. The bank stated, "The Russia-Ukraine conflict will remain a major source of market uncertainty for the foreseeable future, which will also suppress business and consumer confidence in the Eurozone. We also believe that even if Venezuelan crude oil exports expand, the Eurozone will find it difficult to benefit from the continued decline in energy prices."
Crédit Agricole further commented, "Based on our foreign exchange holdings data, the euro remains one of the most sought-after long currencies among the G10 currencies." ING, on the other hand, holds a view of a weakening dollar, stating, "The previous 10% drop in the dollar exchange rate was largely due to foreign exchange hedging operations, rather than a direct sell-off of dollar assets. Based on our forecast that the Federal Reserve will further cut interest rates by 50 basis points, and that German fiscal stimulus policies will accelerate the recovery of the Eurozone economy, we believe the dollar's decline may continue in 2026. We maintain our optimistic assessment, expecting the euro/dollar exchange rate to reach around 1.22 by the end of 2026."
Trading advice
The euro is currently in a neutral range against the US dollar, requiring a strong catalyst to break out in either direction. Investors are advised to wait for further downside before considering buying on dips.
Overall trend: Neutral range
Today's support levels for EUR/USD: 1.1610 – 1.1550 – 1.1480
Today's resistance levels for EUR/USD: 1.1690 – 1.1730 – 1.1800
Euro/Dollar Trading Signals
Go long EUR/USD at the 1.1580 support level, with a target price of 1.1800 and a stop loss at 1.1500.
Short EUR/USD at the resistance level of 1.1770, with a target price of 1.1500 and a stop loss at 1.1840.
The US dollar weakened again against other major currencies due to unexpected negative events in the United States. Federal Reserve Chairman Jerome Powell is embroiled in financial allegations, while President Trump pressured the Fed to lower benchmark interest rates according to the White House's wishes. However, Fed officials have expressed support for Powell and his policy proposals, temporarily halting the dollar's decline.
The outlook for US interest rate policy continues to influence the euro/dollar exchange rate.
Foreign exchange market trading data shows that the outlook for US interest rate policy remains a key factor influencing the euro's exchange rate against the US dollar. The US dollar continued to record net gains this week, pushing the euro/dollar exchange rate gradually down to the 1.16 range. Strong US economic data is enough to weaken market expectations for a near-term interest rate cut by the Federal Reserve, and financial markets are increasingly focused on whether the Fed will maintain its current accommodative policy stance or shift to tightening in 2026.
Overall, the market's reassessment of the Federal Reserve's policies is expected to be the core factor driving the euro-dollar exchange rate in the short term.
(EUR/USD daily chart source: FX678)
From a technical perspective, analyzing the daily chart, the Euro/USD pair is attempting to return to the neutral range of 1.1685-1.1750. A successful break above this range would pave the way for a move towards the key psychological resistance level of 1.1800, and also suggest a potential bullish reversal. Currently, the 14-day Relative Strength Index (RSI) is hovering around 42, gradually approaching the 50 neutral line; the Moving Average Convergence Divergence (MACD) lines are also beginning to turn upwards, awaiting new strong bullish momentum.
Conversely, for a clear downward trend to be triggered, short-selling forces would need to push the exchange rate below the key psychological support level of 1.1500.
Euro/Dollar Outlook for the Next Few Months
Against this backdrop, Crédit Agricole predicts that the euro will fall back to 1.14 against the dollar by mid-year and further to 1.10 by the end of 2026. However, ING believes that after short-term volatility, the euro is likely to break through the 1.20 mark against the dollar.
From an external perspective, recent US economic data has been mixed, but overall performance remains strong, enough for the market to price in expectations of a Fed rate cut in January. Meanwhile, evolving geopolitical tensions remain a key driver in early 2026.
In response, Crédit Agricole pointed out that US President Trump's decision to order the overthrow of Venezuelan President Maduro's regime may alleviate the negotiating pressure on Russian President Putin in the Russia-Ukraine conflict, potentially leading to a continued escalation of the conflict. The bank stated, "The Russia-Ukraine conflict will remain a major source of market uncertainty for the foreseeable future, which will also suppress business and consumer confidence in the Eurozone. We also believe that even if Venezuelan crude oil exports expand, the Eurozone will find it difficult to benefit from the continued decline in energy prices."
Crédit Agricole further commented, "Based on our foreign exchange holdings data, the euro remains one of the most sought-after long currencies among the G10 currencies." ING, on the other hand, holds a view of a weakening dollar, stating, "The previous 10% drop in the dollar exchange rate was largely due to foreign exchange hedging operations, rather than a direct sell-off of dollar assets. Based on our forecast that the Federal Reserve will further cut interest rates by 50 basis points, and that German fiscal stimulus policies will accelerate the recovery of the Eurozone economy, we believe the dollar's decline may continue in 2026. We maintain our optimistic assessment, expecting the euro/dollar exchange rate to reach around 1.22 by the end of 2026."
Trading advice
The euro is currently in a neutral range against the US dollar, requiring a strong catalyst to break out in either direction. Investors are advised to wait for further downside before considering buying on dips.
Overall trend: Neutral range
Today's support levels for EUR/USD: 1.1610 – 1.1550 – 1.1480
Today's resistance levels for EUR/USD: 1.1690 – 1.1730 – 1.1800
Euro/Dollar Trading Signals
Go long EUR/USD at the 1.1580 support level, with a target price of 1.1800 and a stop loss at 1.1500.
Short EUR/USD at the resistance level of 1.1770, with a target price of 1.1500 and a stop loss at 1.1840.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
