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Euro 2026 Outlook: EUR/USD Bulls Look to Reset Multi-Year Rally as Monetary Policy Diverges

By :   Michael Boutros , Sr. Technical Strategist
January 3, 2026 6:00 PM

Euro Technical Outlook- EUR/USD Coiled Below Pivotal Resistance

  • Euro set to close the year up more than 13%, near four-year highs
  • Federal Reserve to emphasize jobs outlook- markets pricing another 50bps in cuts
  • ECB likely on hold as inflationary pressures ease- growth prospects improve
  • Outlook constructive into 2026- EUR/USD coiled below pivotal resistance- risk rises for correction within broader uptrend

Euro surged more than 17% off the yearly lows with EUR/USD exhausting into pivotal resistance in Q3 at multi-year highs. Price has been coiling just below, and the focus is on a breakout into the yearly cross with the broader outlook still constructive into 2026.

Euro Price Chart – EUR/USD Monthly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

Euro rallied into uptrend resistance in September at 1.1917-1.2020- a region defined by the 100% extension of the 2022 advance and the 38.2% retracement of the 2008 decline. Note that the upper parallel of the 2022 pitchfork converges on this threshold into the start of the year with EUR/USD coiled just below. Monthly momentum extended into the highest levels since 2021- that instance capped a multi-month advance to multi-year highs. Risk for some exhaustion while below this pivot zone but the broader outlook remains constructive while above the median-line.

A topside breach / close above this 1.2020 is needed to fuel the next major leg of the rally towards the 2021 High-week close at 1.2218 and the 2021 high / 2018 high-close at 1.2350-1.2414- look for a larger reaction there IF reached. Subsequent resistance eyed at the 1.618% extension of the 2022 advance at 1.2992.

Euro Price Chart – EUR/USD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; EUR/USD on TradingView

A closer look at the weekly chart shows EUR/USD trading just below confluent resistance into the close of December at 1.1747/75- a region defined by the 2025 high-week close, the 61.8% retracement of the September decline, and the 2025 high-close. Look for possible inflection off this zone into the yearly cross.

Support rests with the March 2020 / 2022 high and the 78.6% retracement of the July advance at 1.1497-1.1505. A break / close below this threshold would threaten a deeper correction within the broader uptrend with subsequent support seen at the April high-close at 1.1394 and 1.1254/75- a region defined by the 38.2% retracement of the yearly range, the 52-week moving average, and the 61.8% retracement of the late-2020 decline, and the 2023 swing high. Note that the median-line converges on this threshold in late-February / early-March - look for a larger reaction there IF reached.

Bottom Line: The broader EUR/USD outlook remains tilted to the topside into the yearly cross, but the advance may be vulnerable to a larger correction in the first half of the year. From a trading standpoint, losses should be limited to 1.1275 IF Euro is heading higher in 2026 with a close above 1.2020 needed to fuel the next major leg of the EUR/USD advance.

--- Written by Michael Boutros, Senior Market Analyst

Follow Michael on X @MBForex

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