Key Moments
- EUR/USD fell for a second straight session, reaching a nearly four-week low around 1.1670 during Monday’s Asian trading.
- The pair stayed just above the 100-day Simple Moving Average at 1.1666, a key technical level watched by traders.
- Technical indicators, including MACD below zero and RSI at 44, suggest growing downside momentum for EUR/USD.
EUR/USD Slides to Multi-Week Low
EUR/USD extended its slide for a second day. It faced strong selling pressure and dropped near 1.1670. Traders are watching to see if it breaks below the 100-day SMA. This level is critical before a further retreat from the three-month high above 1.1800 on December 24.
Geopolitics and Policy Shape FX Flows
Rising geopolitical tensions have supported demand for the US Dollar as a safe-haven asset. This has added pressure on EUR/USD. However, expectations for a dovish Federal Reserve may limit the dollar’s strength.
Meanwhile, market participants increasingly believe the European Central Bank has ended its rate hikes. This could support the euro and cushion the pair’s decline. The contrasting policies of the Fed and ECB create a nuanced trading environment for EUR/USD.
Good morning dealers Eur/usd reduced short from average 1.1725 at 1.1685 +40 pips on 2.5 lots & short now 12.5 lots at the average. Enjoy your day & coffee! pic.twitter.com/iTOJwfHm9x
— walter vannelli #FX (@waltervannelli) January 5, 2026
Technical Picture: Indicators Turn Bearish
Daily chart signals favor sellers. The MACD line is below its Signal line and under zero. The histogram’s negative portion is widening, signaling increasing bearish momentum.
The RSI stands at 44, below the neutral 50 line, showing fading upward momentum. Immediate support is at the 100-day SMA at 1.1666. Holding above this level is key to limiting short-term weakness.
| Indicator | Level / Status | Implication |
|---|---|---|
| Spot price (Asian session) | ~1.1670 | Near a four-week low |
| Recent high | Just above 1.1800 (Dec 24) | Reference for pullback |
| 100-day SMA | 1.1666 | Key support and pivot |
| MACD | Below Signal line and zero | Bearish momentum building |
| RSI (daily) | 44 | Fading bullish momentum |
100-Day SMA Guides Market Bias
The 100-day SMA remains an important reference for EUR/USD. As long as the pair closes above it, the trend retains some constructive elements. Pullbacks may remain limited above this line.
A daily close below the SMA would shift the bias toward sellers. This would support expectations for a deeper decline. The MACD below zero and RSI under 50 confirm the ongoing corrective phase.
Sustained support above the SMA could stabilize price action. However, until momentum improves, the risk remains skewed toward further downside if support fails.
(Technical analysis assisted by AI tools)
EUR/USD Daily Chart
EUR/USD daily chart
Understanding the Euro and Its Drivers
What is the Euro?
The Euro is the currency of 20 EU countries in the Eurozone. It is the second most traded currency after the US Dollar. In 2022, it accounted for 31% of all FX transactions, with daily turnover over $2.2 trillion.
EUR/USD is the most traded currency pair, making up 30% of all transactions. Other major pairs include EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%).
ECB’s Role in the Eurozone
The European Central Bank in Frankfurt sets interest rates and manages monetary policy for the Eurozone. Its main goal is price stability, either controlling inflation or stimulating growth.
The ECB uses interest rates as its primary tool. Higher rates usually strengthen the Euro. The ECB Governing Council, composed of national bank heads and six permanent members, including President Christine Lagarde, meets eight times a year to set policy.
Inflation Data and the Euro
Eurozone inflation, measured by the Harmonized Index of Consumer Prices (HICP), is key for the Euro. Inflation above the ECB’s 2% target may force rate hikes. Higher rates make the Euro more attractive to global investors.
Economic Data Impacts
Economic indicators, such as GDP, PMIs, employment, and consumer sentiment, affect the Euro. Strong data can attract investment and prompt the ECB to raise rates, strengthening the Euro. Weak data usually weakens the currency.
Data from Germany, France, Italy, and Spain is especially important, as these countries account for 75% of the Eurozone economy.
Trade Balance as a Driver
The Trade Balance measures the difference between exports and imports. A positive balance increases demand for the Euro, while a negative balance can weaken it. High demand for exports supports currency strength.
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