EUR/USD Price Forecast - EUR Slides Toward 1.17 as Euro PMI Disappoints and Dollar Waits for Jobs Test

EUR/USD 2026 Outlook: Trading Around 1.17 As DXY Holds The 98–100 Pivot

Macro reset in EUR/USD after a 14% US Dollar slide in 2025

EUR/USD enters 2026 in a very different regime than a year ago. Through most of 2025 the US Dollar lost roughly 14% against the euro as markets priced a full Fed easing cycle and a softer US growth path. That move took EUR/USD from parity fears in late-2024 back above 1.1200 at one point, before the pair stalled when the Fed finally started cutting rates and the “buy the rumour, sell the news” dynamic kicked in. Since Q4 2025, the Dollar Index has stopped trending and settled into a 97.94–100.22 band, while EUR/USD has effectively moved from a clean directional story into a slower, grind-type environment. The key message going into 2026: the easy EUR/USD upside from the 2024 lows is behind us; the next leg will have to fight a data-driven, two-way macro tape.

Price action in EUR/USD: from the 1.1800 rejection to the 1.1700 risk zone

Spot EUR/USD now trades around 1.1720–1.1740 after failing to sustain late-December highs above 1.1800. The pair has broken a prior rising trendline from earlier lows and is clearly leaning lower in the very early days of 2026. Immediate resistance sits near 1.1764, just under the failed 1.1800 zone, which now acts as the first line where euro bulls need a daily close back above to regain control. On the downside, the market is watching 1.1700 as the next decisive level. A clean break and daily close below 1.1700 would confirm that the latest leg is not just noise inside a range but a genuine shift back toward Dollar strength. Beneath 1.1700, the bigger structural level is the Q4 floor around 1.1500, which held multiple times and effectively defined the lower bound of last year’s EUR/USD range. That 1.1500 area is where medium-term bulls will start to step in size if we get there. For now, the pair is sitting in the upper half of that 1.1500–1.1800 corridor, but momentum is pointed south.

US Dollar (DXY) structure: why the 97.94–100.22 band matters for EUR/USD

The Dollar Index spent the entire second half of 2025 grinding sideways after an early-year spike failed. On the monthly and weekly charts, DXY shows three weeks of support holding around a Fibonacci area at 97.94, while the 100.00–100.22 band — former support turned resistance — capped every upside attempt last year. That 100 handle is now the line bulls must clear to trigger a more meaningful USD trend. Above 100–100.22, the next obvious target is the 102 region. As long as DXY stays trapped between roughly 98 and 100, EUR/USD is unlikely to break out in a sustained fashion either way; expect false breaks and mean-reversion trades to dominate. Currently, DXY trades near 98.40, effectively mid-range, which aligns with EUR/USD hovering in the 1.17s rather than exploding higher or collapsing. The implication: for EUR/USD bears, the big acceleration doesn’t start until DXY finally prints and holds levels above 100 again.

PMI divergence: Eurozone manufacturing at 48.8 vs US above 50 keeps EUR/USD under pressure

The latest data round reinforces a familiar divergence. Eurozone manufacturing PMI for December was revised down from 49.2 to 48.8, the weakest reading since April and a clear contraction signal below the 50 line. Germany — the core industrial engine of the bloc — printed an even softer 47.0, highlighting ongoing weakness in orders, backlogs and employment. France is the lone modest bright spot, with manufacturing PMI at 50.7, barely in expansion. Across the Atlantic, US manufacturing is hardly booming, but the anticipated S&P/ISM manufacturing readings around 51.8 still sit on the expansion side of the threshold. On top of that, the US labour market remains firm: the November 2025 Nonfarm Payrolls report showed around 199,000 new jobs with unemployment at 3.7%. That combination — Eurozone factories stuck below 50 while US industry and jobs hold up — supports a modest growth and yield advantage for the USD. As long as that gap persists, rallies in EUR/USD into the high-1.17s and above 1.18 are more likely to be sold than chased.

Near-term EUR/USD technical map: 1.1764 resistance, 1.1700 break, 1.1500 as deep support

Short-term technicals line up cleanly with the macro story. EUR/USD has already broken below a prior trendline, confirming that the late-December push above 1.1800 was a fading move rather than the start of a new bull leg. Immediate resistance is clustered around 1.1764 and the recent 1.1800 spike zone. As long as daily closes sit below that pocket, the path of least resistance is lower. The market’s focus now is on 1.1700. That round number is acting as both psychological and technical pivot; a decisive close below opens space for a move toward 1.1680–1.1650 where option strikes are concentrated. Those strike areas are already being used by derivative traders to structure put positions, signalling that professional money is hedging for further downside. If US data in the coming week prints strong, especially Nonfarm Payrolls near or above the 200,000 region again, the sell-off can accelerate and bring the 1.1500 Q4 base back into play. Conversely, a clear recovery back above 1.1764–1.1800 would force shorts to reassess and could trigger a squeeze toward the mid-1.18s, but that is not the dominant scenario as long as Eurozone data keeps coming in soft.

Event risk cluster: ISM, HICP, CPI and NFP as the next catalysts for EUR/USD

The calendar in the coming days is loaded with releases that matter directly to EUR/USD. On the US side, ISM Manufacturing PMI, ISM Services PMI, ADP employment, Trade Balance, Consumer Credit and, most importantly, the December Nonfarm Payrolls and the first January Michigan Consumer Sentiment read will all hit in a tight window. On the Eurozone side, the key number is the Harmonised Index of Consumer Prices (HICP), with Germany’s HICP in focus first, followed by the broader Eurozone print. Consensus expects a moderation in Eurozone inflation, which would tilt the European Central Bank more dovish at the margin and weigh on the euro. If that softer HICP coincides with a still-resilient US labour print around or above the 199,000 mark seen previously, the rate-differential argument swings further towards the Dollar and validates a stronger DXY, weaker EUR/USD setup. On the other hand, a clear downside surprise in US jobs combined with firmer-than-expected Euro inflation would hurt the USD narrative and could push EUR/USD back above 1.18. The risk skew into this data cluster is asymmetric: the market is already positioned for Fed cuts in 2026, so strong US numbers have more room to shock than weak ones.

Cross-checks: EUR/USD vs GBP/USD, GBP/EUR and USD/JPY

Cross-asset and cross-FX price action confirms that the euro, not just the dollar, is the weak leg right now. GBP/USD trades near 1.3480–1.3490 and has shown a cleaner bullish structure in recent weeks. Bulls have defended pullbacks from the 1.3000 area, with resistance capped so far around 1.3500. Support levels in Cable line up at 1.3414, 1.3355–1.3371 and 1.3312, illustrating a constructive sequence of higher lows. Against the euro, the pound is holding around 1.1477 in GBP/EUR, meaning EUR/GBP remains under pressure as UK data firms. UK manufacturing PMI has recovered to around 50.6, the highest since September 2024, still modest but clearly stronger than Eurozone PMI at 48.8. That divergence, combined with a recent Bank of England rate cut that actually improved sentiment by reducing budget-driven uncertainty, leaves the euro underperforming not just versus USD but also versus GBP. On the other side of the Dollar story, USD/JPY trades near 156.50 after another bounce from the 140.00 area earlier, with a broader grinding bullish trend still in place despite a December rate hike from the Bank of Japan. The 160.00 region remains a political and intervention line in the sand, but as long as USD/JPY holds higher lows, this pair remains a primary venue for Dollar strength. The combined message across GBP/USD, GBP/EUR, EUR/USD and USD/JPY is straightforward: the euro is structurally softer than both GBP and USD, while JPY remains the funding currency in the background.

DXY at 98.40, EUR/USD near 1.17 and the “calm before the storm” narrative

Early January trading is deceptively quiet. The DXY at roughly 98.40 appears stable, but that stability is built on thin post-holiday liquidity and a market that is explicitly “waiting for the data.” Equities rallied hard into the end of 2025 on a dovish Fed pivot, compressing volatility. Gold trades near $4,320 after failing around $4,400, reflecting a consensus that the next big Fed move is a rate cut. That consensus, combined with crowded positioning, creates a classic “calm before the storm” setup: low volatility, tight ranges, but heavy sensitivity to the next macro surprise. For EUR/USD, this means the current 1.17–1.18 coil can break sharply in either direction once the labour and inflation data hit. Options markets reflect this through relatively cheap volatility compared with the spikes seen mid-2025, making directional options structures attractive for those looking to position ahead of the moves rather than chase spot afterwards. Put structures around 1.1680–1.1650 and call spreads above 1.1800–1.1900 are both in play; the fact that downside strikes are being explicitly discussed tells you where the bias sits right now.

Medium-term views: bank projections and the 1.20–1.24 upper band for EUR/USD

Beyond the immediate data window, institutional forecasts still lean towards a stronger euro over a multi-year horizon. Several major houses project EUR/USD rising into the 1.23–1.24 region by 2027 as US exceptionalism fades and the Fed moves deeper into an easing cycle relative to the ECB. That medium-term picture implies that the 1.1500–1.1700 zone in early 2026 is not obviously an area to chase fresh, long-term USD longs. Instead, it looks more like a tactical battlefield where short-term traders try to exploit near-term Dollar strength within a broader, flatter two-to-three-year path. The key for professionals is horizon discipline. At a 1–3 month horizon, weak Eurozone PMIs at 48.8, German manufacturing at 47.0, EUR/USD trading below 1.1764 resistance and DXY defending 97.94 support favour further EUR downside. On a 12–24 month horizon, the combination of a 14% Dollar slide already realised, potential Fed cuts, and external forecasts pointing to 1.23+ suggests the euro can regain ground later in the cycle. Both views can be true if the timeframes are clearly separated.

Trading strategy and verdict on EUR/USD: short-term Sell, structurally cautious euro bull

Taking all the data together — spot at 1.1720–1.1740, rejection above 1.1800, Eurozone manufacturing at 48.8 versus US expansion above 50, DXY anchored at 98.40 with firm support at 97.94, and a heavy event calendar led by US Nonfarm Payrolls — the risk-reward right now favours a bearish stance on EUR/USD in the short term. Tactically, the setup argues for a Sell bias on rallies toward 1.1764–1.1800 with a downside target zone at 1.1680–1.1650 initially and an extension potential toward 1.1500 if US data stays strong and Eurozone inflation undershoots. Invalidation for that bearish stance sits on a sustained break and daily close above 1.1850–1.1900, which would signal that the market is re-pricing Fed risk more aggressively and abandoning the Dollar consolidation narrative. At a strategic, multi-year level, the pair still has room to revisit the 1.20–1.22 band and, if the longer-term bank projections prove accurate, the 1.23–1.24 area by 2027. But that is a separate, slower-moving story. Right now, with EUR/USD pinned near 1.17, DXY near 98.40, Euro data deteriorating and US labour still printing around 199,000 with unemployment at 3.7%, the clean call for the next leg is simple: EUR/USD is a Sell here with a bearish bias into the upcoming data, not a dip-buy, until the tape proves otherwise.

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