EUR/USD Analysis on January 19, 2026

[Ben Graham]

The wave count on the 4-hour chart for EUR/USD remains unchanged. There is no talk of the uptrend that began in January of last year ending, but the wave structure since July 1, 2025, has taken on an extended, corrective appearance. In my view, the pair has completed the formation of corrective wave 4, which has a non-standard internal structure. Within this wave, we have observed exclusively corrective patterns, leaving no doubt about its corrective nature.

I believe the construction of the uptrend is not yet complete, and its targets are spread up to the 25th level. In the coming weeks, we can expect the continuation of the uptrend wave formation, which may take a five-wave form. However, there is no certainty that the current formation is an impulse wave, so the entire upward set of waves may conclude with three waves. In that case, a new downward phase, also corrective, would already be beginning.

EUR/USD added about 50 basis points on Monday, which is still too small to draw any major conclusions. The amplitude of price movements has remained low for several months, with the market in a dormant state, barely reacting to world events. Normally, news such as criminal proceedings against the Federal Reserve chair, Trump's attempt to annex Greenland, a new escalation of the global trade war, a new Trump-EU conflict, or events in Iran would cause serious market volatility. Yet, at the start of the new year, the market continues to remain silent and inactive. Most of the euro's gains on Monday occurred within the first hour of market opening. Traders quickly priced in Trump's new tariffs and the EU's potential retaliatory measures.

Economic events did take place on Monday. The Eurozone Consumer Price Index (CPI) for December slowed to 1.9% year-on-year. This is a concerning level for the euro, as inflation has fallen below the ECB's target. If this trend continues, the central bank may eventually have to intervene to prevent further slowdown. The ECB's only option would be to implement another round of monetary easing.

Although market participants largely ignored ECB rate cuts throughout 2025, the situation in 2026 may differ. Last year, the market focused entirely on the trade war, Trump's pressure on the Fed, the US-China standoff, and domestic initiatives from the new White House administration. We do not yet know what will dominate traders' attention in 2026, but early events suggest the focus may remain on the same factors.

General Conclusions

Based on my analysis of EUR/USD, I conclude that the instrument continues to form an upward phase of the trend. Donald Trump's policies and the Fed's monetary policy remain significant factors driving long-term weakness in the US dollar. The targets of the current trend phase may extend up to the 25th level. However, for these targets to be reached, the market must complete the extended formation of wave 4. At present, we see only the market's willingness to continue this wave. Therefore, a decline toward the 15th level can be expected in the near term.

On a smaller scale, the full upward trend is visible. The wave count is non-standard because the corrective waves vary in size. For example, the larger wave 2 is smaller than the internal wave 2 within wave 3. However, such variations are not unusual. It is best to identify clear structures on the charts rather than adhere strictly to every wave. The upward structure is currently clear and unambiguous.

Key Principles of My Analysis

1. Wave structures should be simple and understandable. Complex structures are difficult to trade and often subject to change.
2. If there is uncertainty about market conditions, it is better to stay out of the market.
3. There is never 100% certainty in the direction of movement. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.

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