20.01.202619:10 Forex Analysis & Reviews: EUR/USD Analysis on January 20, 2026

The wave structure on the 4-hour chart for EUR/USD remains unchanged. There is no talk of canceling the upward segment of the trend that began in January of last year, but the wave structure starting from July 1, 2025 has taken on an extended corrective form. In my view, the instrument has completed the construction of corrective wave 4, which has a non-standard internal structure. Within this wave, we observed exclusively corrective formations, leaving no doubt about the corrective nature of this wave.

In my opinion, the construction of the upward segment of the trend is not yet complete, and its targets extend as far as the 2.5000 level. In the coming weeks, we may see a continuation of the upward wave sequence, which could take the form of a five-wave structure. However, there is no confidence that an impulsive segment of the trend is currently forming, so the entire upward wave sequence could also end after three waves. In that case, the formation of a new downward segment would already be underway—also corrective in nature.

The EUR/USD rate gained another 80 basis points during Tuesday, fully in line with the current news backdrop. Recall that over the weekend Donald Trump announced higher tariffs on a number of European countries due to their refusal to recognize the "legitimate rights" of the United States to Greenland and to voluntarily hand over the island—or at least sell it. The tariffs will amount to 10% from February 1 and will be raised to 25% from June 1 if no deal is reached. The European Union is preparing retaliatory tariffs on U.S. goods totaling nearly $100 billion, as well as the so-called "anti-coercion mechanism," which would severely restrict access to the European market. As we can see, the trade war is taking on a new dimension in 2026, and the EU is ready to respond to the U.S. eye for an eye.

Of course, not all European politicians support retaliatory measures. Many believe that new negotiations are needed. However, in my view, such talks can end only one way—with new concessions from the European Union. In six months, Trump may decide that Portugal or Spain is strategically important for U.S. security and demand that these countries be placed under Washington's control, as was already the case with Canada. Therefore, this time the EU must either stand its ground or surrender and move entirely under Trump's leadership.

Undoubtedly, the EU economy will also suffer from additional tariffs, just as the U.S. economy will suffer from retaliatory measures. However, it is Trump who continues to raise the stakes in this trade confrontation. Last year, demand for the U.S. currency steadily declined amid Trump's ever-increasing import tariffs. This year, the story is repeating itself. From a wave perspective, what may now be forming is either the second wave of a new downward trend segment or wave e of an upward structure.

Overall Conclusions

Based on the EUR/USD analysis, I conclude that the instrument continues to build an upward trend segment. Donald Trump's policies and the Federal Reserve's monetary policy remain significant long-term factors weighing on the U.S. dollar. The targets of the current trend segment may extend as far as the 2.5000 level. However, to reach these targets, the market must complete the formation of an extended wave 4. At present, we only see the market's intention to continue this wave. Therefore, a decline toward the 1.5000 level can be expected in the near term.

On a smaller timeframe, the entire upward trend segment is visible. The wave structure is not the most standard, as the corrective waves differ in size. For example, the higher-degree wave 2 is smaller than the internal wave 2 within wave 3. However, this also happens. I would like to remind you that it is best to identify clear and understandable structures on charts rather than rigidly attaching labels to every wave. At present, the bullish structure raises no doubts.

Key Principles of My Analysis:

1. Wave structures should be simple and easy to understand. Complex structures are difficult to trade and often signal changes.
2. If there is no confidence in what is happening in the market, it is better to stay out.
3. There is never and can never be 100% certainty about market direction. Do not forget to use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.