Eurostat, the agency that releases European economic data, released the flash estimate of Eurozone inflation on December 2, 2025. The report showed that the annual rate of inflation stood at 2.2% in November 2025; however, the final reading of the number was then revised slightly down to 2.1% on the 17th of December 2025, which is equivalent to the October 2025 rate. This marks a gradual move toward the European Central Bank’s preferred inflation target of 2%.

Eurozone Inflation Outlook: Cooling Headline Masks Persistent Service Pressures

The next data release is due on the 7th of January 2026, on which the forecasts indicate easing to 2.0% of the annual rate of inflation, according to analyst predictions. Although this headline rate looks comforting, a closer look at its components highlights more issues. Service inflation sped up to 3.5% in November from 3.4% in October, which marked its highest level since April, adding 1.58 percentage points to the total inflation.  This rise is a cause of grave concern, given that services make up to nearly half of the total private consumption in the Eurozone.

The Disparities in inflation pressures indicate that the Eurozone is currently a transition economy. For most of 2025, the ECB struggled with sticky inflation, but recent data show that inflation is finally cooling. 

Chart 1: Eurozone Annual Inflation Rate, Source: EurostatChart 1: Eurozone Annual Inflation Rate, Source: Eurostat

Geopolitics Sends EUR/USD into Retreat

Eurozone economic headlines are being overshadowed by a split focus of home-related price stability and an unstable political environment. As markets reopened for their first full trading week of the year 2026, it is apparent that renewed pressure is being put on EUR/USD, which is currently trading close to 1.1730 as of writing. This is due to a perfect storm that involves a dampened inflation outlook that does not permit leeway for a hawkish European Central Bank (ECB), as well as a huge geopolitical shock in South America that sees investors running for cover to the USD as a haven. The abduction of Nicolas Maduro by the US-led forces over the weekend has caused shock waves around the world. When there is so much uncertainty, the “risk-off” playbook takes over, and traders tend to unload risky assets and purchase US dollars. The US dollar has seen a strong safe-haven play because the markets are considering the possibility of an extended military campaign and the impact that it would have on the global oil supply.

EURUSD Technical Analysis

The EUR/USD pair is currently trading at 1.1730 as of writing, which is showing some weakness since failing to hold above the psychological level of 1.1800. The corrective move shown on the four-hour time frame comes after the pair experienced a strong upside movement from the region of 1.11500 that began in early December.

Key Technical levels of EURUSD According to Analysts:

Key Technical levels of EURUSD:

  1. 1.1800: This is a very important supply zone where the pair has consistently been testing. The rejections at this zone in late December indicated intense selling interest and may become a tough resistance for any bullish attempt.
  1. 1.1750: Minor resistance along the previous area of consolidation.

Support Zones:

  1. 1.1650: Strong support from the mid-range zone, which has acted as both support and resistance before.
  2. 1.1500: This has been established as a major demand area that has held several times, forming an important structural level for the pair. A breach below this level would confirm a major change in market sentiment.
  Chart 2: EUR/USD H4, Source: Tradingview    Chart 2: EUR/USD H4, Source: Tradingview  
Explore EUR/USD Trading Now!

Higher time frame

The higher time frame shows EUR/USD at a critical juncture in its multi-year cycle. The symmetrical formation shown in the chart below symbolizes the state of limbo which has existed amongst the fundamental influences over past periods of time. With the pattern maturing and approaching the ceiling of the structure, a major trend formation seems to be on the cards within the next 6 to 12 months.

Chart 3 EUR/USD Weekly, Source TradingviewChart 3 EUR/USD Weekly, Source Tradingview

Conclusion:

As we move further into the first week of 2026, the outlook for EURUSD will likely remain highly data-dependent and sensitive to broader geopolitical shifts. The three interconnected catalysts likely to move the pair are:

  1. Eurozone CPI- January 7: This will shape expectations for early ECB positioning.
  2. Geopolitics: The ongoing Venezuela saga will affect global risk appetite.
  3. NFP-January 9: US labor data continues to be the decisive driver of the dollar. Traders will have to watch key levels for range breakouts, but also keep a close eye on economic events for the week.