Title: EUR/USD Monthly Forecast – January 2026
Original Source: DailyForex
Author: Christopher Lewis
Link: https://www.dailyforex.com/forex-technical-analysis/2026/01/eurusd-monthly-forecast-01-january-2026/239241
Introduction
The EUR/USD currency pair closed out 2025 with a mixed performance, facing ongoing macroeconomic uncertainties and central bank policies that heavily influenced price action throughout the year. As the calendar flips to January 2026, traders are closely monitoring several key factors that could shape the direction of the most traded currency pair in the Forex market.
January’s monthly forecast evaluates various technical and fundamental aspects to deliver a comprehensive look at the pair’s potential movement. With a dominant presence of the Federal Reserve’s and the European Central Bank’s monetary directions, coupled with inflation metrics and geopolitical developments, the EUR/USD may experience notable volatility.
Market Overview
2025 ended with the US dollar showing signs of relative weakness against major currencies, including the euro, largely driven by expectations that the Federal Reserve might soften its monetary stance. Conversely, the European Central Bank signaled openness to maintaining tighter policies for a longer period due to persistent inflation readings within the Eurozone.
– In 2025, the EUR/USD fluctuated within a broader range, creating significant trading opportunities for swing and position traders.
– Throughout the last quarter, EUR/USD had difficulty maintaining gains above the 1.10 resistance level.
– The pair saw temporary support at 1.06 and 1.05, with bullish sentiment appearing sporadically but lacking consistent momentum.
Key Technical Highlights for January 2026
The new year begins with the EUR/USD trading near the 1.09 mark. Traders are watching for confirmation of a potential breakout or return to previous support zones. Technical signals provide insight into what may be expected during the first month of 2026.
Support and Resistance Levels:
– Major resistance remains around the 1.10 level, which has shown to be a significant psychological and technical barrier.
– Above 1.10, the next resistance zones sit around 1.1150 and 1.12.
– On the downside, the most immediate support is near 1.0750, followed by structural support around 1.06 and the 1.05 threshold.
Price Action and Trends:
– The EUR/USD remains in a broadly neutral pattern when viewed from a longer-term perspective. The pair has not committed to either a bullish or bearish trend over a multi-month time frame.
– The 50-day moving average has provided temporary support and resistance, acting as a median level throughout Q4 2025.
– Should the pair break and hold above the 1.10 mark, that might signal a shift toward bullish dominance heading into Q1 2026.
Chart Patterns and Indicators:
– On the monthly chart, the EUR/USD formed a symmetrical triangle over the past few months, pointing toward a possible breakout scenario.
– Momentum indicators such as the RSI and MACD are neutral. The Relative Strength Index hovers near 50, reflecting a lack of clear momentum.
– Moving average convergence divergence (MACD) suggests a potential bullish crossover may emerge if bullish pressures persist.
Fundamental Drivers
Federal Reserve Outlook:
– With inflation cooling in the latter half of 2025, pressure has increased on the Federal Reserve to pivot away from its tight monetary policy stance.
– Markets are beginning to price in possible rate cuts in the second or third quarter of 2026, though Fed officials remain cautious.
– The Fed’s next move will significantly influence the dollar’s performance into Q1 2026.
European Central Bank Dynamics:
– The European Central Bank has taken a comparatively hawkish tone, especially concerning core inflation, which has remained stubbornly high in key Eurozone economies like Germany and France.
– ECB President Christine Lagarde indicated that policy would remain restrictive until there is clearer evidence that inflation targets are sustainably met
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