EUR/USD: Trapped at 1.1800 as Euro Area Inflation Cools Significantly
By Zain Vawda | 25 February 2026 at 12:28 UTC
Current Market Overview
The EUR/USD currency pair is currently struggling for direction around the 1.1800 level, with recent Euro Area inflation data influencing market sentiment. The annual inflation rate in the Euro Area cooled to 1.7% in January 2026, marking the lowest level since September 2024. Core inflation, which excludes volatile items such as energy and food, also fell to 2.2%, the lowest since October 2021.
Inflation Data Insights
Despite expectations for a bullish move in the Euro following the Euro CPI release, the data did not inspire confidence. The month-on-month inflation rate dropped to -0.6%, worse than the anticipated -0.5%. This decline in inflation is attributed to a significant strengthening of the euro, which surpassed the $1.20 mark, its highest valuation in over four years. This appreciation has contributed to a moderation in price growth across various sectors:
- Services inflation moderated to 3.2%.
- Processed food, alcohol, and tobacco inflation slowed to 2.0%.
- Energy prices fell dramatically by 4.0% in January.
However, some sectors saw inflationary pressures increase, such as unprocessed food, which rose to 4.2%, and non-energy industrial goods, which saw a slight uptick to 0.4%.
Future Outlook for EUR/USD
The next movements for the EUR/USD pair are likely to be influenced by the strength of the US dollar, which has recently shown signs of resurgence. Federal Reserve policymakers have adopted a more hawkish tone, which could further bolster the USD. Upcoming speeches from Fed officials and ECB President Lagarde may provide additional market direction.
Technical analysis indicates that EUR/USD is in a consolidation phase, squeezed between a descending trendline and a key horizontal support zone. A breakout is anticipated, with immediate resistance at the 1.1840 level and potential support at 1.1700. The overall medium-term trend remains bullish, as indicated by the upward sloping 100-day simple moving average (SMA).