Today might be the most important day of January for EURUSD. Yesterday’s FOMC, today’s US GDP, and the ECB meeting have converged to create a pivotal moment for the pair. 

Yesterday, the FOMC was slightly hawkish, but there were no major changes except for the removal of the phrase “Inflation has made progress toward the Committee’s 2 percent objective” from the statement. However, Powell downplayed the importance of this, implying that it does not signal a significant shift in policy. 

Today, the ECB is almost certain to cut rates by 25 basis points. The market has already priced in the rate cut, so the focus will be on forward guidance. After today, the market is pricing in two more cuts with 100% probability and a third cut with 67% probability. Any changes in ECB communication that alter this pricing could significantly impact EURUSD, either positively or negatively. I believe at least two more cuts will be necessary for the Eurozone, given the prolonged period of sluggish economic activity, inflation expectations below the ECB’s 2% target for Q1, tariff risks, and political uncertainties within the EU. 

However, today’s most important and impactful event might be the US GDP data. The annualized Q4 GDP first print will be announced today, and market expectations are highly divergent. Surveys show forecasts ranging from 0.9% to 3.2%, with a median of 2.6%. One key factor contributing to this wide range is the impact of tariff threats on net imports. A significant deviation from the 2.6% median could trigger substantial volatility for EURUSD today. 

Additionally, traders should pay attention to EURUSD’s negative seasonality effect in February as we approach the end of the month. Over the past ten years, EURUSD has recorded a positive return in February only once, in 2016. On average, EURUSD has fallen by 0.90% during February over the last decade. 

(EURUSD Daily Chart) 

1.048 is a key long-term level that has served as support for years. The only time it broke, EURUSD fell below parity. After the December break, EURUSD retreated to near 1.02. With slightly neutral ECB rhetoric and somewhat eased tariff fears, EURUSD is now retesting this level, but this time as resistance. You can refer to our earlier analyses for more details. 

At present, EURUSD is caught between the broken downtrend line and 1.048, searching for a clear direction. Today could be a decisive moment, depending on the incoming data. If not, the uncertainty may carry over into the infamous February.