EUR/USD Forecast on December 31, 2025

[Ben Graham]

On Tuesday, the EUR/USD pair continued a very weak decline toward the 38.2% corrective level at 1.1718 after four rebounds from the resistance zone of 1.1795–1.1802. A rebound in quotes from the 1.1718 level would work in favor of the European currency and a return of the pair to the 1.1795–1.1802 level. Consolidation of the pair below 1.1718 would increase the likelihood of continued decline toward the next corrective level of 50.0% at 1.1656.

The wave situation on the hourly chart remains simple. The last completed upward wave failed to break the peak of the previous wave, and the new downward wave has not yet broken the previous low. Thus, the trend officially remains "bullish." It would be hard to call it strong, but in recent weeks the bulls regained confidence, and then the holidays began. Easing of the Fed's monetary policy will put pressure on the dollar in 2026, while the ECB will not create any problems for the euro. The "bullish" trend will end if the pair consolidates below the 1.1718 level and the last three lows.

On Tuesday, the news background in the U.S. and the European Union remained absent, and both the previous week and the current week are more festive than working ones. Ahead of the New Year, bullish traders stopped attacking and gave the bears a chance to show themselves. Of course, few people want to trade during the New Year, which is why we are seeing a weak decline—simply to avoid standing still. Most likely, this situation in the market will persist until next year. As early as next week, economic data will begin to arrive, the market will be saturated with holidays, and it will be ready for real trading. In my opinion, we may see a new bullish offensive already at the beginning of next year.

On the 4-hour chart, the pair made a reversal in favor of the European currency and resumed growth toward the 0.0% corrective level at 1.1829. A rebound in quotes from this level would work in favor of the U.S. currency and lead to some decline toward the support zone of 1.1649–1.1680. Consolidation above the 1.1829 level would increase the likelihood of further euro growth. No emerging divergences are observed on any indicator today.

Commitments of Traders (COT) Report:

During the last reporting week, professional players opened 8,884 long positions and 2,769 short positions. Sentiment in the "Non-commercial" group remains "bullish" thanks to Donald Trump and his policies and continues to strengthen over time. The total number of long positions held by speculators now stands at 277 thousand, while short positions amount to 132 thousand. This is more than a twofold advantage for the bulls.

For thirty-three consecutive weeks, large players were getting rid of short positions and increasing long ones. Then the "shutdown" began, and now we are seeing the same picture: bulls continue to build long positions. Donald Trump's policies remain the most significant factor for traders, as they cause numerous problems that will have a long-term and structural impact on America—for example, deterioration of the labor market. Traders fear a loss of the Fed's independence in 2026 under pressure from Trump and amid Jerome Powell's resignation in May.

News Calendar for the U.S. and the Eurozone:

On December 31, the economic calendar contains no events. The influence of the news background on market sentiment on Wednesday will be absent.

EUR/USD Forecast and Trading Advice:

Selling the pair was possible on a rebound from the 1.1795–1.1802 level on the hourly chart with a target of 1.1718. These trades can be kept open today. A close below 1.1718 will allow holding the trades with a target of 1.1656. Buy trades can be opened on a rebound from the 1.1718 level with a target of 1.1795.

Fibonacci grids are built from 1.1392–1.1919 on the hourly chart and from 1.1066–1.1829 on the 4-hour chart.

The material has been provided by InstaForex Company - www.instaforex.com