EUR/USD is currently positioned between 1.18 and 1.1820, following a week that saw an ascent towards 1.1875 on Monday, which subsequently retraced. The price is positioned at the upper band of the recent structure, with a defined range approximately between 1.1780 on the lower end and 1.1900 on the upper end. The current level remains the highest sustained region since 2021, indicating that the prevailing trend over the past quarters has been a weakening of the USD, despite the last two weeks feeling somewhat laborious. The prior week produced a significant rejection candle beneath 1.19, yet the pair has maintained its position above 1.1780; the market is currently consolidating at elevated levels within the range, without reversing the trend. Trading spreads have expanded, intraday fluctuations are more pronounced, yet the pair remains positioned within the territory typically associated with a weaker dollar regime, rather than that of a stronger dollar regime. The immediate future is characterized by a condensed US macroeconomic schedule. Due to the recent government shutdown, critical data that typically disseminates throughout the month is now concentrated within a limited timeframe. Non-farm payrolls for January are set to be released on 11 February, followed by CPI on 13 February, with retail sales data scheduled in between. The determination of whether US yields remain at current levels or rise again is influenced by that cluster. Every movement within the range of 1.1780–1.1900 is strategically aligned with those dates. Moves into the 1.1870–1.1900 range are utilized to decrease EUR long positions in anticipation of CPI risk, while declines into the low-1.18s are being purchased by accounts maintaining a medium-term weaker-USD strategy. If employment figures and inflation both exceed expectations, EUR/USD could rapidly rebound toward 1.17. However, the critical question remains whether this rebound signifies a shift in the prevailing trend or merely a temporary adjustment within it.
The fundamentals in the US continue to show strength: manufacturing data has exceeded expectations, labor indicators are holding steady, and there is a noticeable improvement in consumer sentiment. The interplay of these factors maintains 10-year US yields around 4.2–4.3%, providing the dollar with sufficient carry to respond effectively during liquidity concerns. Concurrently, the policy position of Washington under the current Trump administration does not correspond with a “strong-USD at any cost” perspective. The Treasury team, under Bessent’s leadership, is at ease with a slightly weaker dollar as it bolsters exports, mitigates tariff tensions, and enhances domestic earnings. The markets recognize that there is a political inclination towards a weaker USD in the medium term, despite the robust data signals. This explains why EUR/USD has the potential to trade above 1.18, even with strong US macroeconomic data: the narratives surrounding interest rates and policy are influencing the market in contrasting ways. The existing tension creates volatility; however, it also prevents the dollar from reclaiming the level of dominance necessary to pull the pair back to 1.05–1.08. The dismantling of positioning in precious metals serves as a direct factor influencing EUR/USD flows. Gold surged to nearly $5,600 an ounce, only to plummet to around $4,400 within days, and now faces challenges each time it nears the $5,000 mark. Silver has experienced a decline of nearly 50% from its peak value. Those moves are not gradual reallocations; they are compelled liquidations in congested anti-USD positions. When leveraged longs in gold and silver are being reduced due to margin calls and CME margin increases, capital is sourced from all available avenues. That encompasses EUR/USD longs that were included in the same macro basket: a weaker dollar, elevated metals, and increased risk assets. This is one of the reasons the pair has remained stagnant below 1.19, even considering the underlying narrative surrounding the USD. The market continues to address the surplus leverage that accumulated during the period when gold and silver experienced significant upward movement. As the clean-up progresses and volatility in metals continues to compress, EUR/USD will shed one of its significant headwinds.
Crypto serves as a significant transmission channel for EUR/USD, and IBIT – the iShares spot Bitcoin ETF – acts as a valuable indicator. Bitcoin experienced a decline, dropping below $70,000, briefly touching levels under $65,000, and is currently trading in the high-$60,000s. The recent shift has been characterized by fluctuating flows in IBIT: robust on some days, while remaining flat or negative on others. During the earlier leg higher, when BTC was breaking to records and IBIT saw persistent inflows, the pattern was straightforward: US capital was prepared to increase exposure in crypto, tech, and growth stocks simultaneously. The observed pattern typically coincided with a depreciating dollar and a gradual increase in the EUR/USD exchange rate. The existing administration is distinct. The significant decline in BTC and the fluctuations in IBIT flows indicate a trend towards de-risking, with increased cash reserves and heightened demand for USD during corrections. Until IBIT returns to consistent inflows during rallies and BTC trades comfortably above $70,000 again, EUR/USD will lack the same risk-on tailwind. The pair has the potential to increase due to rate differentials and policy, yet it is no longer benefiting from a straightforward global liquidity wave. On the euro side, growth is average yet showing signs of stabilization. The euro area is not providing standout data; however, it is also not indicating a new recessionary shock. The European Central Bank is proceeding cautiously regarding aggressive rate cuts, particularly given the persistent nature of wage growth and services inflation. Market curves continue to reflect a scenario where the Federal Reserve is anticipated to implement more cuts than the ECB after the current inflation surge is managed. The relative path serves as the foundation for the movement that elevated EUR/USD from the 1.05–1.08 range into the high-1.10s and subsequently the 1.18–1.19 area. Provided that the anticipated differential remains intact, any decline toward 1.17–1.18 will encounter buying interest from real-money and reserve-type participants looking to establish long positions in euros. Only a structural shift – for example, a re-pricing that indicates the Fed will maintain policy significantly higher than the ECB well into 2027 – would warrant a sustained move back below 1.16.
The technical outlook for EUR/USD is somewhat unclear, yet it remains interpretable. On the weekly timeframe, the pair exhibited a significant rejection candle beneath 1.19 last week, reaching a high close to 1.1875 and featuring an extended upper wick. The candle has validated that the 1.1875–1.1900 range serves as the current resistance band, indicating that pursuing breakouts above this level prior to US data presents a suboptimal risk/reward scenario. On the downside, the support level at 1.1780 has been tested but remains intact on a weekly close. The current speculative range for this week is approximately 1.17825 to 1.19020. Provided that closes remain above 1.1780, the structure indicates a high-level consolidation following an upward trend, rather than a reversal. A daily dip beneath 1.1780 prior to CPI would not alter the situation; the key factor is if a weekly close settles below that range. A weekly close below 1.1780 creates potential for a movement toward the mid-1.16s. A weekly close above 1.1875–1.1900 would indicate that the consolidation phase has concluded and that the next movement towards the low-1.20s is beginning. Geopolitical factors remain in the backdrop yet continue to influence EUR/USD pricing. The recent US–Iran tension has eased following reports that discussions in Oman are “going well,” leading to a reduction in the safe-haven premium associated with both the dollar and gold simultaneously. That being noted, the circumstances can change swiftly. Any breakdown in those discussions, or a sudden escalation in the region, would lead to a typical surge into USD, Treasuries, and short-term funding instruments. On the Eastern front, the conflict between Russia and Ukraine persists as it enters its fourth year. Sanction regimes are evolving, with discussions surrounding Russian energy exports and the significance of gold reserves within Russia’s territory. Energy flows and sanctions enforcement have a more immediate impact on European growth and trade balances compared to US growth. Currently, markets perceive Europe’s challenges as manageable and have not adjusted the euro’s valuation as a crisis currency. If that changed – for example, if energy prices spiked in a way that impacted European industry more severely than US industry – EUR/USD would respond swiftly through diminished growth expectations and reduced demand for EUR assets.
Considering all factors, EUR/USD around 1.18–1.1820 does not exhibit a clear trend leg; however, the overall balance still favors one side. The pair is currently trading at elevated levels within its recent range, surpassing the thresholds that characterized the stronger-USD environment of the past few years. The macroeconomic and policy context continues to support a weaker dollar over the multi-quarter outlook, despite the firmness observed in near-term US data. The progress of the metals and crypto liquidations that triggered a significant wave of forced selling is notable. The primary risk in the immediate future arises from the upcoming US jobs and CPI data, which are set to be released in the next few days; these announcements have the potential to impact EUR/USD by 80–120 pips within a single trading session. The pivotal threshold is approximately 1.1780 based on a weekly closing analysis. Above that level, EUR/USD continues to present a buying opportunity with a positive outlook: pullbacks toward 1.1780–1.1800 serve as entry points for increasing EUR exposure, anticipating a retest and potential breakout of 1.1875–1.1900, leading to a rise into the low-1.20s as market volatility subsides. A consistent weekly close beneath approximately 1.1780 would alter the position to Hold, redirect attention to the mid-1.16s, and necessitate a reevaluation of the extent of tightening the market is beginning to incorporate into the Fed curve.