The EUR/USD shows signs of recovering from losses recorded in the previous session, trading near 1.0280. However, the pair’s upward momentum remains constrained as market caution prevails ahead of President-elect Donald Trump’s inauguration later in the day. U.S. markets will remain closed on Monday in observance of Martin Luther King Jr. Day.

Concerns over Donald Trump’s policy proposals—such as imposing tariffs, extending tax cuts, and deporting illegal immigrants—have driven U.S. Treasury yields higher and bolstered the dollar ahead of the inauguration. Analysts suggest that the Federal Reserve’s interest rate trajectory will depend heavily on the pace and impact of the Trump administration’s policy rollouts.

The euro, meanwhile, faces significant headwinds amid ongoing negative expectations for the European Central Bank (ECB). Markets are pricing in a 25-basis-point rate cut at each of the next four ECB meetings, reflecting concerns about the Eurozone’s economic outlook and the assumption that inflation pressures remain under control.

Minutes from the ECB’s December meeting, released last week, showed that policymakers focused more on the speed of policy easing in 2025 than on pausing or ending the rate-cutting cycle. Notably, there was discussion of a larger-than-usual 50-basis-point rate cut to counter downside risks to growth, exacerbated by domestic and global political uncertainties.

EUR/USD Daily Technical Analysis for January 20th

Technical indicators on the daily chart continue to highlight downside risks for the EUR/USD pair. The bearish 20-day Simple Moving Average (SMA) provides dynamic resistance around 1.0340, while the 100-day SMA trends downward near 1.0750 after crossing below the 200-day SMA. Technical indicators remain entrenched in negative territory and lack clear directional momentum. Below this, the yearly low of 1.0177 comes into play, with further downside targeting 1.0100, heading toward parity and beyond.

Resistance Levels:If the pair manages to break above the 1.0340 resistance area, it could correct toward 1.0430, a level previously reached earlier this month. The next significant resistance lies at the 1.0500 threshold.

Support Levels: Immediate support is at 1.0260, a level where buyers emerged in the past three trading sessions.