The EUR/USD pair is currently fluctuating within a narrow yet volatile range of 1.1650–1.1700, showing signs of recovery from the previous week’s low of 1.1617 and consistently testing the 1.1690–1.1700 area. The shift is influenced not solely by traditional growth or interest rate differentials; rather, it is propelled by a significant institutional impact on the US Dollar. Federal prosecutors have indicated the possibility of criminal charges against Jerome Powell concerning his June 2025 Senate testimony regarding a 2.5 billion dollar renovation of the Fed’s headquarters. Powell’s assertion that this situation serves as a pretext tied to political pressure regarding interest rates transforms a legal matter into an assault on the independence of the Federal Reserve. The credibility of the US as a monetary anchor is being reassessed by the markets, resulting in a broad impact on the USD. The euro comprises approximately fifty-seven percent of the dollar index, making EUR/USD the most direct means to convey that institutional risk. As investors reduce their USD exposure due to governance concerns and look for alternatives, the EUR inherently captures a significant portion of that movement, maintaining support for the pair despite intraday declines that pull it back toward 1.1680 following attempts at 1.1700.
The geopolitical factors that have driven gold above 4,600 dollars per ounce are similarly influencing the EUR aspect of the equation. A US operation in Venezuela, significant casualties during protests in Iran, and an escalating Russia–Ukraine conflict characterized by drone and missile strikes near NATO borders all contribute to an increase in global risk premia. China’s move to restrict rare-earth exports to Japan introduces a significant structural risk to the supply chain. In typical circumstances, such stress would bolster the demand for USD, affirming its status as the leading safe-haven currency. This instance sees the institutional response at the Fed redirecting a portion of that demand towards gold, rather than the dollar. XAU/USD is currently hovering near record highs in the range of 4,580–4,600 dollars, whereas EUR/USD is experiencing upward movement not due to a booming European economy, but rather because the USD has diminished in its status as a pure safe asset. The euro stands as the “least bad” liquid alternative, providing sufficient support for the pair as long as the political tensions between the administration and the Fed persist without resolution. The macroeconomic indicators are not allowing the dollar to decline without resistance. The most recent US labor report indicated an increase in nonfarm payrolls by approximately fifty thousand in December, falling short of expectations, while the unemployment rate decreased to around 4.4 percent. The current mix weakens the argument for swift and substantial cuts, yet it fails to fully restore confidence in the USD as the Powell investigation continues to shape the discussion. The upcoming catalyst is inflation. Market participants are closely monitoring the impending CPI and PPI releases. Should CPI and PPI fall short of expectations, the interplay of subdued data and political influence solidifies anticipations for rate reductions in 2026, enabling EUR/USD to rise beyond 1.17. If inflation exceeds expectations, the pair will encounter a mixed signal: a hawkish data impulse amidst a politically weakened dollar. In that scenario, the initial response is expected to be a swift downward adjustment in EUR/USD as crowded longs unwind their positions, rather than a straightforward, robust USD bullish trend. The data risk thus serves as a limitation on the immediate potential for euro appreciation, even as the underlying narrative supports a weaker dollar.
Within the eurozone, the overarching narrative reflects a trend of gradual stabilisation rather than remarkable robustness. The Sentix Economic Confidence Index for January showed an improvement from minus 6.2 to minus 1.8, marking the best reading in six months. The index remains below zero, indicating a lack of bullish sentiment among investors regarding eurozone growth; however, the trend is shifting away from profound pessimism. For the euro, that is significant. It mitigates tail risks associated with recession and facilitates investor rotation into the single currency when the USD is adversely affected by political factors. The demand for EUR is not driven by Europe’s narrative of high growth; rather, it stems from its status as a substantial, liquid currency supported by a framework that, for the time being, is not in direct conflict with its central bank. The Commitment of Traders data indicates the extent to which positioning has become extended in relation to this movement. Large speculators have maintained a net-short position on the US Dollar Index since June; however, this short position has been significantly decreased by approximately seventy-five percent, now standing at around minus thirty-eight thousand contracts. This indicates that the previously dominant bearish perspective on the dollar has evolved. In the euro market, net-long positions in EUR futures have reached an eighteen-month peak for large speculators and a fifteen-month peak for asset managers. Gross long positions have reached unprecedented heights for both groups. This represents the concept of a crowded trade. When positioning is this extended, any incremental upside in EUR/USD requires fresh capital or forced covering by residual shorts; otherwise, the market risks becoming susceptible to profit-taking cascades. Any unexpected positive data from the US, indications of a reduction in the political tensions surrounding the Fed, or even a brief alleviation of geopolitical stress could trigger a swift washout of thirty to one hundred pips as leveraged long positions are unwound. The underlying narrative may still support a depreciating dollar; however, the trajectory has become more complex and less straightforward, as positioning risk has gained equal significance to macroeconomic risk.
From a pure price-action perspective, EUR/USD is attempting to solidify a bullish shift while maintaining its broader range. Spot trades within the range of 1.1655–1.1690, an increase from last week’s low of 1.1617, yet remains constrained by the 1.17 level. The 100-day exponential moving average is positioned near 1.1665 and is showing an upward trend. The ascending 100-day average indicates a strengthening medium-term trend, while simultaneously serving as a point of immediate resistance. The price action is currently concentrated near the lower Bollinger Band at 1.1650, indicating that the recent downward movement is finding stability despite an increase in volatility. Above current levels, the middle Bollinger band at approximately 1.1728 and the upper band around 1.1817 establish the forthcoming resistance zone. A decisive daily close above the 1.1728–1.1817 range would indicate a significant shift towards a prolonged upward movement instead of remaining within a volatile range. On shorter timeframes, the pair has shown a clearer bullish signal. The EUR/USD pair has surpassed a descending trendline on the one-hour chart, regained the 20-period EMA, and is currently testing the 50-period EMA cluster situated between 1.1673 and 1.1680. The specified range corresponds with the 38.2 percent Fibonacci retracement of the most recent decline, establishing 1.1675–1.1680 as the crucial intraday pivot point. Above that band, the short-term structure supports bullish sentiment; below it, the potential for a rebound diminishes, risking a return to last week’s lows. Momentum indicators support this perspective while also indicating potential overheating. Intraday RSI readings are positioned around 69, indicating robust buying momentum while also cautioning that the market is nearing overbought territory. In practice, that configuration frequently leads to sideways consolidation or a pullback prior to another upward attempt, especially with significant binary events like the US CPI on the horizon. Immediate resistance is positioned around 1.1737 and subsequently at 1.1789, whereas near-term support is found just below 1.1640–1.1644. The downside structure is clearly outlined and essential for effective risk management. The initial level of significance is the 1.1640–1.1644 range, aligning with the lower boundary of the recent breakout area and the lower Bollinger band on intraday charts. Provided that daily closes remain above that band, any dips appear to be corrective noise within an overall positive framework. A break and daily close below 1.1615–1.1617, which represents last week’s low, would convey a different signal.
This would indicate that the recent recovery to 1.17 was merely a corrective bounce within a wider range, thereby allowing for a potential decline toward the mid-1.15s. Considering the current saturation of euro longs, a breach of 1.1617 could potentially initiate stop runs and compel selling, thereby making a decline to 1.1550 or below feasible without any significant alteration in macroeconomic indicators, merely through the process of position liquidation. The integration of macroeconomic factors, market positioning, and technical analysis results in a clear yet sophisticated perspective. Damage to the Federal Reserve’s credibility, influenced by political factors, alongside gold reaching record highs above 4,560–4,600 dollars per ounce and a declining US Dollar Index, creates a favorable environment for EUR/USD. The Eurozone sentiment has stabilized, evidenced by the Sentix improvement from minus 6.2 to minus 1.8, reinforcing the euro’s position as a viable alternative. The pair is currently maintaining a position above 1.1640, successfully defending 1.1617, and is in the process of establishing a base in the range of 1.1675–1.1680. Key upside reference points include 1.1737, 1.1789, and the wider supply zone between 1.18 and 1.1820. In contrast, the positioning of speculative and asset managers in EUR futures has reached multi-year extremes, rendering the trade susceptible to sudden shake-outs whenever data or political developments temporarily favor the dollar. The current market signals indicate a Buy bias on EUR/USD, but this should be approached with tactical discipline. The appealing area is a retracement into 1.1675–1.1650, with an upward target on a test of 1.1737, followed by 1.1789 and the 1.18 region. Meanwhile, structural risk is established below 1.1615, where the most recent rebound does not succeed. The directional assessment of the existing data and price framework indicates a bullish stance; however, it is essential to size and manage the position as a crowded, politically influenced trade instead of a straightforward, early-cycle macro long.