The EUR/USD rate is currently fluctuating within a narrow yet politically charged range. The price has fluctuated from a recent low of approximately 1.1576–1.1589, the lowest point in nearly two months and a seven-week low, to highs close to 1.1808, which represented a three-month peak in late December. The current movement of EUR/USD is fluctuating between 1.1640 and 1.1685, consistently probing the 1.1640 to 1.1650 range, which aligns with the nine-day EMA near 1.1645. The key resistance levels are distinctly outlined: 1.1680, followed by 1.1740–1.1744, then 1.1800–1.1808, with 1.1918 acting as the significant structural cap from June 2021. On the downside, the initial significant support level is 1.1580–1.1589, succeeded by 1.1520, 1.1468, and subsequently 1.1440 as the more profound bearish extension. The psychological 1.1500 level serves as a dividing line, determining if the current movement in EUR/USD is merely a corrective pullback or the beginning of a more significant decline for the Euro. The recent shift in EUR/USD is not influenced by traditional macroeconomic indicators but rather by a distinct political event. Trump has linked US trade policy to the control of Greenland, stating that starting on 1 February 2026, imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the UK will incur a 10% tariff, which will escalate to 25% on 1 June if an agreement regarding Greenland is not achieved. The foreign exchange markets have responded by somewhat reinstating the “Sell America” strategy. The US Dollar Index has declined beneath 99.00, currently trading in the range of 98.8–98.9, following a breach of significant support at 99.065, which has now turned into resistance. Immediate DXY supports are positioned at 98.667, followed by 98.409, 98.151, and 97.863; the RSI on DXY has dipped below 30, indicating a formally oversold dollar.
For EUR/USD, the combination of tariffs on US allies, a weaker dollar index, higher US yields, and risk-off behaviour has lifted the pair from its lows around 1.1576 back into the 1.16–1.17 range. The Euro is gaining strength as the dollar faces challenges, despite the trade war having a direct impact on European economies. This is precisely why this maneuver is precarious: should tariffs be diminished or if the market concludes that Europe will experience a more significant impact on growth, EUR/USD could reverse rapidly. The second factor influencing EUR/USD is the trajectory of the Federal Reserve and the increasing political risk premium associated with US monetary policy. Robust US labor data has led investors to reconsider early and aggressive rate-cut scenarios: rather than cuts occurring between January and April, the prevailing outlook has now shifted to the June and September FOMC meetings, with anticipations focused on approximately two cuts in 2026. Simultaneously, the legal and political challenges facing the Fed are providing indirect support to the Euro. Subpoenas directed at the Federal Reserve and Chair Jerome Powell concerning matters related to the renovation of the Washington headquarters have sparked inquiries regarding the independence of the central bank, particularly as Trump advocates for reduced interest rates. Several major banks caution that ongoing pressure on the independence of the Federal Reserve poses a downside risk for the USD, as it erodes confidence in US policy and prompts increased hedging of US asset exposure. For EUR/USD, this indicates that the dollar is caught between solid macroeconomic indicators and a progressively tumultuous political environment. Typically, expectations for rate cuts would limit the strength of the Euro; however, the risks associated with independence and the impact of tariffs are hindering a complete recovery of the USD, resulting in EUR/USD remaining stagnant rather than following a clear trend.
On the Euro side, the narrative is less dramatic yet remains significant. The upcoming schedule is filled with significant events, starting with the German Producer Price Index at 09:00, followed by the Eurozone current account at 11:00, and concluding with the German ZEW sentiment release an hour later. Stronger-than-expected ZEW and a still-healthy current account typically bolster the Euro, whereas weak PPI or a decline in the external balance could provide the dollar with some leeway. One structural drag on EUR/USD is attributed to energy. Increased energy costs, particularly in natural gas, exert pressure on the Eurozone’s trade balance and may restrict the Euro’s potential for appreciation, even in a context of dollar weakness. That’s precisely why some experts are wary of pursuing the pair significantly beyond 1.18 in the present context. In the long term, leading financial institutions generally anticipate an increase in EUR/USD by late 2026, albeit with adjusted forecasts. One camp has revised its year-end EUR/USD forecast down from 1.24 to approximately 1.20, anticipating that this level will be achieved later rather than sooner. Another house continues to project 1.22 by the end of 2026. The rationale remains clear: diminishing interest-rate differentials, increased hedging against US assets, and a gradual shift towards European assets as Eurozone growth shows signs of stabilization. Even those optimistic institutions, however, emphasize that the trajectory upward is inconsistent and that short-term dollar surges are still quite probable. The EUR/USD daily chart continues to exhibit a bearish bias, despite the recent rebound. The price is currently trading below the 50-day EMA, which is clustered around 1.1670, while oscillating near the nine-day EMA at approximately 1.1645. The 14-day RSI is positioned in the 44–45 range, indicating a neutral-to-bearish sentiment, while the MACD signal lines are trending downward, reinforcing the notion that sellers maintain medium-term dominance. Support levels are distinctly positioned on the downside: the recent low at 1.1576–1.1589, followed by 1.1520, then 1.1468, and ultimately 1.1440, indicating a more pronounced bearish extension level. The psychological 1.1500 level represents the point at which pressure could shift from a temporary tactical dip to a more significant structural decline for the Euro.
On the topside, resistance begins at approximately 1.1680, followed by levels at 1.1740–1.1744, then 1.1800, and subsequently 1.1808, which marks the recent three-month high, before reaching 1.1918, the peak since mid-2021. It is significant that EUR/USD is currently positioned beneath both the short- and medium-term moving averages, which limits potential gains unless the pair establishes a base above the 1.1670–1.1740 range. Currently, the analysis indicates a medium-term downtrend with a short-term bounce observed. During intraday trading, EUR/USD has momentarily surpassed resistance in the 1.1640–1.1650 range and has approached the 1.1690–1.1700 zone, with a significant level at 1.1694 serving as the immediate breakout pivot. The pair has been trading around 1.1684–1.1685, positioned near the upper boundary of a short-term ascending channel, which remains within a broader down-trending framework. The convergence of the 50-period and 200-period moving averages on short-term charts suggests a potential shift in directional bias, indicating a move away from a purely bearish outlook towards a more balanced market environment. Simultaneously, the intraday RSI has approached or exceeded 70, indicating overbought conditions. The situation suggests a potential pullback, particularly as the dollar index appears oversold with an RSI under 30, and the DXY is currently around 98.837 after breaching channel support. Should EUR/USD maintain a firm position above 1.1694, the subsequent intraday resistance levels to monitor are 1.1744 and the range of 1.1800–1.1808. Should the breakout not succeed, the initial downside retracement levels to monitor are 1.1640, followed by the prior low zone approximately between 1.1576 and 1.1589. The pair is on the brink of a failed spike, which could lead to a retest of the lower half of the 1.15–1.18 range. The clustering of trade setups provides significant insights into the current professional outlook on EUR/USD. One widely recognized structure is to designate 1.1560–1.1580 as an accumulation area and 1.1730–1.1800 as a distribution zone.
A standard long position involves purchasing EUR/USD at approximately 1.1560, aiming for a target of 1.1800, while placing a stop loss close to 1.1470. The trade posits that the existing geopolitical and Federal Reserve-related disturbances are predominantly reflected in the pricing below 1.16. It suggests that further tariff developments or Fed commentary will likely find it challenging to drive the pair significantly below the 1.1500 psychological threshold unless there is a genuine macroeconomic decline in the Eurozone. Conversely, a traditional short strategy involves selling EUR/USD around 1.1730, anticipating a decline towards 1.1500, with a stop set at 1.1800. The current configuration reflects a reliance on the prevailing daily downtrend, the elevated intraday RSI, and the undervalued dollar index, while acknowledging that historical trends in February generally support the USD. The fundamental premise is straightforward: the initial attempt at 1.1740–1.1800 is more prone to falter than to successfully breach, especially while the Fed continues to oppose a significant rate-cut cycle. When analyzed collectively, these structures indicate a market characterized by two-sided risk, with the 1.1560–1.1730 corridor identified as the primary zone for range trading, rather than exhibiting a unilateral trend. Considering the macroeconomic impact, central bank dynamics, and technical indicators, EUR/USD is currently not exhibiting a clear trend; rather, it is situated within a challenging political range. Tariffs associated with Greenland and direct assaults on the independence of the Federal Reserve are evidently detrimental to the dollar, resulting in DXY falling below 99.00 and pushing EUR/USD up from 1.1576 into the mid-1.16s. Currently, the pair remains below the 50-day EMA at approximately 1.1670, with the 14-day RSI hovering around 45. The broader chart indicates a continuing downtrend, suggesting a significant risk of retests towards the levels of 1.1580–1.1520 and potentially 1.1468–1.1440 if the shock subsides.
In the medium term, major banks forecasting EUR/USD at 1.20–1.22 by late 2026 indicate that while Euro appreciation is genuine, it is gradual. Consequently, the potential for upside from the current levels of 1.16–1.17 appears limited at this time. In the short term, intraday indicators reveal an overbought Euro and an oversold dollar, with prices approaching the resistance band of 1.1694–1.1744. Based on that analysis, my position is clear: EUR/USD is a HOLD with a tactical bearish inclination. Strength in the 1.1730–1.1800 range supports the strategy of selling rallies, whereas dips into the 1.1560–1.1500 zone suggest a preference for buying on weakness, provided that the geopolitical uncertainties and Federal Reserve discussions remain unsettled. The pair does not present a straightforward buy or sell opportunity at 1.16–1.17; it functions as a range instrument where a disciplined approach to level-based trading is more effective than reacting to headlines in either direction.