The EUR/USD analysis January 2026 highlights a critical juncture as Eurozone inflation expectations hit record highs. The pair currently trades at 1.0850, down 0.3% from yesterday’s close. Compared to last week, EUR/USD has declined 0.8%, showing bearish momentum. The monthly low stands at 1.0800, while the high is 1.0950, indicating a narrow trading range.
EUR/USD Analysis January 2026 – Market Overview
Recent price action has been dominated by shifting inflation expectations and ECB policy uncertainty. Over the past three trading sessions, EUR/USD has tested 1.0825 support twice but failed to break below it. Volume has been above average, suggesting strong institutional participation. The pair remains in a bearish trend since hitting 1.0950 last week.
Fundamental Analysis and Key Drivers
The primary driver behind EUR/USD’s movement is Eurozone inflation expectations, which reached 2.8% for the 1-year horizon. According to the ECB’s latest report, 5-year expectations hit 2.4%, the highest since the survey began. Despite recent easing in actual inflation data, Bloomberg reports that ECB members are keeping all options open, giving equal odds to rate cuts or hikes.
As we discussed in our recent analysis of EUR/USD Forecast January 2026: 1.15 Critical Bullish Rally,
German fiscal stimulus and resilient labor markets add complexity to the outlook. Unemployment remains near record lows, supporting consumer spending. Cross-market correlations show EUR/USD reacting inversely to DXY strength and US Treasury yields.
EUR/USD Technical Analysis Today
Key support levels are 1.0825 (recent low), 1.0800 (psychological level), and 1.0750 (2026 low). Resistance is found at 1.0900 (200-day MA), 1.0950 (monthly high), and 1.1000 (psychological level). RSI is at 42, indicating neutral momentum. MACD shows bearish crossover below the signal line. The pair is forming a descending triangle pattern, suggesting potential downside breakout. As Reuters reports.
Trading Outlook and Price Prediction
The outlook is bearish with a 1.0750 target if inflation concerns persist. Bullish scenario requires break above 1.0950, targeting 1.1000. Key risks include unexpected ECB policy shifts or US economic data surprises. Watch the ECB’s February 2026 meeting for policy clarity.
This relates to our previous report on Gold Price Forecast Today: $1800 Critical Bearish Plunge Warning.
