Published: 26 February 2026,07:24
Daily Market Analysis New
*Eurozone January headline inflation at 1.7% y/y and core inflation at 2.2%, reinforcing signs of a faster-than-expected cooling in euro-area price pressures.
*The softer inflation backdrop is reviving speculation that the ECB could resume rate cuts later this year, as concerns grow over weak growth, slowing wages, and inflation drifting below target..
*The euro lags higher-yielding currencies such as the AUD and NZD, reflecting widening policy divergence and fading conviction in the single currency.
Market Summary:
The euro is trading on the back foot following confirmation of a sharp disinflationary pulse in the euro area, fueling market speculation that the European Central Bank may be compelled to resume rate cuts later this year. Final data from Eurostat released yesterday confirmed January headline inflation at 1.7% year-on-year, down from 2% in December 2025 and marking the lowest level since September 2024. The monthly decline of 0.6% came in slightly softer than the anticipated 0.5% contraction, signaling a sharper near-term deceleration in prices. Core inflation eased to 2.2% from 2.3%, its lowest reading since November 2021 .
The weaker inflation profile points to a potential disinflationary trend that could have direct implications for the euro’s trajectory and ECB policy direction. Despite an easing in U.S. dollar strength, EURUSD has traded sideways near the 1.0800 level, reflecting the currency’s lack of conviction. The single currency has fared worse against stronger peers, trading notably softer against the Australian and New Zealand dollars, which continue to benefit from their respective central banks’ hawkish stances.
Market perception is shifting toward expectations that the ECB may cut rates later in 2026 to address the region’s gloomy economic performance. Continuum Economics analysts note that the ECB’s December minutes revealed a clear division between doves and hawks, with doves concerned about slowing wage inflation and a weak economic recovery, building a case for two 25 basis point cuts in June and September. Berenberg adds that a stronger euro against the dollar increases the risk of inflation falling below target, which would make another rate cut more likely .
Technical Analysis
The EURAUD pair continues to trade firmly within its long-term downtrend, having declined more than 5 percent since the January peak. The latest price action confirms an acceleration of bearish momentum, with the pair breaking decisively below its recent consolidation range to challenge new cycle lows near the 1.6600 support zone. This breakdown validates the prevailing bearish bias and suggests further downside potential in the sessions ahead.
Momentum indicators confirm the bearish structure. The Relative Strength Index remains suppressed below the 50 midpoint, currently near 42-46 on daily timeframes, reflecting sustained selling pressure and an absence of bullish conviction. The Moving Average Convergence Divergence continues to trend below its zero line, with recent analysis showing the 1D MACD maintaining a bearish cross configuration. Both indicators align with the bearish price action.
Critical levels are now well-defined. A sustained break below 1.6600 would open a path toward the 1.6400 area . Resistance has formed at the near 1.6800 region, where the 50-day EMA near 1.6912 acts as a heavy ceiling for any relief rallies . A move above this resistance would be required to signal a potential trend reversal, though the prevailing momentum and fundamental divergence continue to favor the downside.
Resistance Levels: 1.6750, 1.7050
Support Levels: 1.6400, 1.6190
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