A battle between bulls and bears is about to erupt! The euro retreats to a critical support level.
2026-01-15 21:22:25
On Thursday (January 15), the euro/dollar exchange rate (EUR/USD) has been in a downward trend recently. Although the better-than-expected industrial production data for the Eurozone in November provided temporary support, the strong performance of the US dollar index continued to limit the upside potential of the single currency.
Currently, EUR/USD is trading around 1.1635, continuing to be pressured below the key resistance level of 1.1650, and is only a step away from the one-month low of 1.1618. The short-term downside risk has increased significantly, becoming the core focus of euro trading.
The US Dollar Index (DXY) has recently firmly established itself above its monthly high of 99.25, maintaining strong fluctuations around this level and providing key support for the downward trend of EUR/USD. Market expectations for the Federal Reserve to hold rates steady at its January meeting are largely set, with data from the CME Group's FedWatch Tool indicating that the Fed is highly likely to anchor interest rates in the 3.50%-3.75% range.
Behind this expectation lies the strong performance of US economic data and persistently sticky inflation. US December CPI data demonstrated strong resilience, with the November Producer Price Index (PPI) rising from 2.8% year-on-year to 3%, and the core PPI also rising to 3%, both exceeding market expectations of 2.7%. Meanwhile, retail sales grew 0.6% month-on-month, reversing the 0.1% decline in October and also exceeding the expected increase of 0.4%. This robust economic data and sticky inflation further solidify the logic behind the Federal Reserve's decision to maintain a restrictive monetary policy.
Hawkish figures such as Atlanta Fed President Rafael Bostic have clearly stated that the current inflation level is still significantly different from the Fed's 2% target, and monetary policy must maintain a restrictive stance. This statement provides solid fundamental support for the strong performance of the US dollar index.
In addition, US President Trump reassured the market that there were no plans to fire Federal Reserve Chairman Powell, easing previous market concerns about the Fed's independence and prompting the dollar index to recover quickly from its earlier-week correction, further limiting the euro's upside potential.
It is worth noting that the Federal Reserve has cut interest rates by a total of 75 basis points in three consecutive policy meetings. The market generally believes that the policy benefits of the previous rate cuts have not yet fully penetrated into the real economy, and the Federal Reserve is unlikely to cut rates again in this round. This expectation continues to strengthen the interest rate advantage of the US dollar and put long-term pressure on EUR/USD.
Data released by Eurostat on Thursday showed that eurozone industrial output grew steadily by 0.7% in November, significantly exceeding market expectations of 0.5%; the year-on-year growth rate jumped to 2.5% from 2% in October, also higher than the market consensus of 2%, providing short-term technical support for the euro.
However, from a trend perspective, this positive data is unlikely to reverse the downward trend that the euro has been in since its high in late December.
The fundamentals of the Eurozone's weak economic recovery have not changed. Previously, S&P Global data showed that the Eurozone's manufacturing Purchasing Managers' Index (PMI) had fallen below the 50-point mark, highlighting the weakness in the manufacturing sector.
The market generally believes that the improvement in Eurozone industrial output in a single month is more of a short-term fluctuation and is unlikely to change the overall pattern of weak economic recovery. Therefore, it failed to push EUR/USD to break through the key resistance level, and the rebound of a single currency appears to lack momentum.
For euro trading, two key variables need to be closely monitored in the short term, as their performance will directly affect the short-term trend of EUR/USD.
On the data front, market focus has shifted to the New York Fed Manufacturing Index and the Philadelphia Fed Manufacturing Report. These two data points will verify the momentum of the US economic recovery in the fourth quarter of 2025. If the data continues to improve, it is expected to further strengthen the US dollar and push EUR/USD down to test the 1.1618 support level. If the data falls short of expectations, the euro may get a breather and usher in a technical rebound.
At the policy level, several Federal Reserve officials, including Atlanta Fed President Rafael Bostic and Fed Governor Michael Barr, will deliver speeches, and their statements on inflation and interest rate policies will be important catalysts for short-term fluctuations in the foreign exchange market. If officials maintain a hawkish stance, it will further suppress the euro; if they release dovish signals, it may trigger profit-taking in the dollar, creating room for a rebound in EUR/USD.
In addition, changes in geopolitical risk premiums are also worth noting. Recently, President Trump confirmed that the situation regarding the deaths of protesters in Iran has eased. As a result, the prices of safe-haven assets such as crude oil and precious metals have come under pressure and retreated. This change may, to some extent, suppress the upward momentum of the US dollar and provide slight support for the euro, but it is unlikely to change the core operating logic of the foreign exchange market in the short term.
In summary, EUR/USD is currently in a situation of "strong US dollar suppression + limited positive factors from the Eurozone," with short-term downside risks still dominating. From a trading perspective, 1.1640 is a key resistance level and also the upper boundary of the descending channel. If it fails to break through effectively, the exchange rate will likely test the one-month low of 1.1618, and may even further decline to lower support levels. If it unexpectedly breaks through 1.1640, the strength of the resistance in the 1.1659-1.1674 range should be monitored.
For euro traders, it is crucial to closely monitor US economic data and statements from Federal Reserve officials, remaining wary of the downside risks posed by a continued strong dollar. Simultaneously, attention should be paid to whether subsequent Eurozone economic data can continue to improve to determine if the single currency has the foundation for a reversal. In the short term, policy divergence and differences in economic data remain the core logic driving EUR/USD's movements. Trading should focus on breakouts and breaches of key levels, adjusting strategies flexibly accordingly.
(Euro/USD daily chart, source: FX678)
At 21:21 Beijing time, the euro was trading at 1.1621/22 against the US dollar.
Currently, EUR/USD is trading around 1.1635, continuing to be pressured below the key resistance level of 1.1650, and is only a step away from the one-month low of 1.1618. The short-term downside risk has increased significantly, becoming the core focus of euro trading.
A strong dollar sets the tone, while the euro's rebound encounters resistance.
The US Dollar Index (DXY) has recently firmly established itself above its monthly high of 99.25, maintaining strong fluctuations around this level and providing key support for the downward trend of EUR/USD. Market expectations for the Federal Reserve to hold rates steady at its January meeting are largely set, with data from the CME Group's FedWatch Tool indicating that the Fed is highly likely to anchor interest rates in the 3.50%-3.75% range.
Behind this expectation lies the strong performance of US economic data and persistently sticky inflation. US December CPI data demonstrated strong resilience, with the November Producer Price Index (PPI) rising from 2.8% year-on-year to 3%, and the core PPI also rising to 3%, both exceeding market expectations of 2.7%. Meanwhile, retail sales grew 0.6% month-on-month, reversing the 0.1% decline in October and also exceeding the expected increase of 0.4%. This robust economic data and sticky inflation further solidify the logic behind the Federal Reserve's decision to maintain a restrictive monetary policy.
Hawkish figures such as Atlanta Fed President Rafael Bostic have clearly stated that the current inflation level is still significantly different from the Fed's 2% target, and monetary policy must maintain a restrictive stance. This statement provides solid fundamental support for the strong performance of the US dollar index.
In addition, US President Trump reassured the market that there were no plans to fire Federal Reserve Chairman Powell, easing previous market concerns about the Fed's independence and prompting the dollar index to recover quickly from its earlier-week correction, further limiting the euro's upside potential.
It is worth noting that the Federal Reserve has cut interest rates by a total of 75 basis points in three consecutive policy meetings. The market generally believes that the policy benefits of the previous rate cuts have not yet fully penetrated into the real economy, and the Federal Reserve is unlikely to cut rates again in this round. This expectation continues to strengthen the interest rate advantage of the US dollar and put long-term pressure on EUR/USD.
Eurozone industrial output exceeded expectations, but this failed to reverse the overall downward trend.
Data released by Eurostat on Thursday showed that eurozone industrial output grew steadily by 0.7% in November, significantly exceeding market expectations of 0.5%; the year-on-year growth rate jumped to 2.5% from 2% in October, also higher than the market consensus of 2%, providing short-term technical support for the euro.
However, from a trend perspective, this positive data is unlikely to reverse the downward trend that the euro has been in since its high in late December.
The fundamentals of the Eurozone's weak economic recovery have not changed. Previously, S&P Global data showed that the Eurozone's manufacturing Purchasing Managers' Index (PMI) had fallen below the 50-point mark, highlighting the weakness in the manufacturing sector.
The market generally believes that the improvement in Eurozone industrial output in a single month is more of a short-term fluctuation and is unlikely to change the overall pattern of weak economic recovery. Therefore, it failed to push EUR/USD to break through the key resistance level, and the rebound of a single currency appears to lack momentum.
Key factors to watch for in future trading: data catalysts and policy statements
For euro trading, two key variables need to be closely monitored in the short term, as their performance will directly affect the short-term trend of EUR/USD.
On the data front, market focus has shifted to the New York Fed Manufacturing Index and the Philadelphia Fed Manufacturing Report. These two data points will verify the momentum of the US economic recovery in the fourth quarter of 2025. If the data continues to improve, it is expected to further strengthen the US dollar and push EUR/USD down to test the 1.1618 support level. If the data falls short of expectations, the euro may get a breather and usher in a technical rebound.
At the policy level, several Federal Reserve officials, including Atlanta Fed President Rafael Bostic and Fed Governor Michael Barr, will deliver speeches, and their statements on inflation and interest rate policies will be important catalysts for short-term fluctuations in the foreign exchange market. If officials maintain a hawkish stance, it will further suppress the euro; if they release dovish signals, it may trigger profit-taking in the dollar, creating room for a rebound in EUR/USD.
In addition, changes in geopolitical risk premiums are also worth noting. Recently, President Trump confirmed that the situation regarding the deaths of protesters in Iran has eased. As a result, the prices of safe-haven assets such as crude oil and precious metals have come under pressure and retreated. This change may, to some extent, suppress the upward momentum of the US dollar and provide slight support for the euro, but it is unlikely to change the core operating logic of the foreign exchange market in the short term.
Summary and Technical Analysis:
In summary, EUR/USD is currently in a situation of "strong US dollar suppression + limited positive factors from the Eurozone," with short-term downside risks still dominating. From a trading perspective, 1.1640 is a key resistance level and also the upper boundary of the descending channel. If it fails to break through effectively, the exchange rate will likely test the one-month low of 1.1618, and may even further decline to lower support levels. If it unexpectedly breaks through 1.1640, the strength of the resistance in the 1.1659-1.1674 range should be monitored.
For euro traders, it is crucial to closely monitor US economic data and statements from Federal Reserve officials, remaining wary of the downside risks posed by a continued strong dollar. Simultaneously, attention should be paid to whether subsequent Eurozone economic data can continue to improve to determine if the single currency has the foundation for a reversal. In the short term, policy divergence and differences in economic data remain the core logic driving EUR/USD's movements. Trading should focus on breakouts and breaches of key levels, adjusting strategies flexibly accordingly.
(Euro/USD daily chart, source: FX678)
At 21:21 Beijing time, the euro was trading at 1.1621/22 against the US dollar.
- 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.
