EUR/USD Forecast: Technicals and Seasonality Hint at Another Leg to the Downside

[Ben Graham]

Most Read: 2026 US Dollar Forecast: How the Fed, Government Spending, and AI Will Drive Volatility

EUR/USD has had an interesting start to 2026. US Dollar strength has kept the pair on a downward trajectory from December 24, 2025 highs around the 1.1800 handle.

Since then, EUR/USD has fallen around 140 pips to a low of around the 1.1660 level yesterday with the potential for further downside still a possibility.

US Dollar Seasonality to Play a Role?

Despite all the talk and concern around the US Dollar, January is historically a positive month for the greenback. With that in mind, this could work in favor of another leg to the downside for EUR/USD.

The US Dollar has risen at the start of the year and this week as well, but this was largely attributed to a spike in haven demand after the US/Venezuela tensions over the weekend.

I do expect the US dollar to gain a bit of strength in the near-term and this feeds in to the trade setup for EUR/USD.

My reasoning is simply down to seasonality as well as the fact that market participants seem too relaxed about global political conflicts right now; if tensions suddenly flare up again, especially in Latin America or Greenland, risky investments could crash, causing traders to rush back to the safety of the dollar.

Technical Analysis on EUR/USD

Let us start with the technical picture on the four-hour chart

EUR/USD has broken the ascending wedge pattern which had been in play since Mid-November.

The breakout of the wedge pattern should lead to a drop of around 160 pips.

The pair has already dropped about a 100-pips before a pullback of around 80-pips

The price is now at the 100-day MA which is providing resistance and could be the start of the next leg to the downside.

EUR/USD Four-Hour Chart, January 6, 2026

zoom_out_map

Source: TradingView.com

Dropping down to the one-hour chart below and for those looking for a better risk-to-reward there may be another opportunity to get involved.

A break below the red zone on the chart below with a potential retest of the zone could provide a tighter stop loss for those looking to get involved.

At present, only a four-hour candle close above the 1.1750 handle would lead me to re-evaluate the setup as that would mean a change in structure has taken place and the par may break to the upside and test recent highs around the 1.1800 handle.

EUR/USD One-Hour Chart, January 6, 2026

zoom_out_map

Source: TradingView.com

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. The provided publication is for informational and educational purposes only.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© 2026 OANDA Business Information & Services Inc.