EUR/USD is currently positioned near $1.1900–$1.1910 following an approximate 0.9% increase on Monday. This movement is primarily influenced by a softer US Dollar rather than a significant surge in Euro strength. The US Dollar Index has reached its lowest point since early 2022, falling below 97.00 and finding stability around $96.90, with an important short-term pivot at the 38.2% Fibonacci retracement level near $96.83. Simultaneously, the news indicating that Chinese regulators have instructed domestic banks to restrict their US Treasury holdings suggests a strategic shift towards diversifying away from dollar-denominated assets. A gradual shift away from Treasuries by a significant reserve holder diminishes demand for USD, thereby bolstering potential gains in EUR/USD. The political landscape amplifies that pressure. In Japan, Sanae Takaichi’s decisive election victory on February 8 has eliminated a degree of uncertainty and initiated what is referred to as the “Takaichi trade”: increased fiscal expansion, enhanced defense budgets, and a heightened domestic risk appetite. Capital is shifting towards Japanese equities and the Yen, diminishing the dollar’s safe-haven premium. In conjunction with this, the alleviation of tensions in the Middle East following the US-Iran discussions in Muscat, which were publicly characterized as “very good,” has led to a withdrawal of further capital from defensive USD positioning. As the risk of conflict diminishes, the dollar relinquishes a fundamental pillar of support, leading to a favorable shift for EUR/USD in response to that adjustment.
The ongoing discussions within the Federal Reserve regarding monetary policy are emerging as a medium-term challenge for the U.S. dollar. Governor Stephen Miran has expressed concerns that the existing policy is “overly tight,” suggesting the possibility of rate cuts of up to 100 basis points in 2026. The rhetoric from a policymaker who has transitioned from the White House Council of Economic Advisers to the Fed casts uncertainty on the extent to which rate decisions are shielded from political influence. Market reactions are increasingly attuned to any indications that the central bank might be pressured to accelerate easing, which diminishes the dollar’s historically strong yield advantage. If Miran’s perspective becomes more widely accepted and the market begins to anticipate a more pronounced easing trajectory, DXY could potentially decline further towards the 95.00 support level indicated in technical analysis. The DXY is currently positioned around $96.90, constrained beneath the 50-period moving average at approximately $97.30 and the 100-period average close to $97.60. This setup suggests that the risk is tilted more towards further weakness rather than a lasting recovery. The current conditions suggest a EUR/USD scenario in which declines are becoming less pronounced, while advances toward $1.1965 and $1.2030 are likely to occur more often. The current calendar positions the dollar in a state of “wait-and-react.” The US Nonfarm Payrolls report, delayed due to the partial government shutdown, is set to be released on Wednesday. The recent ADP report indicated that only 22,000 private sector jobs were added in January, a disappointing figure that has already impacted confidence in the momentum of the US labor market. The prevailing consensus indicates a modest increase of 55,000 jobs. Any significant movement below that range would support the Miran narrative indicating that policy is excessively restrictive, potentially driving DXY towards the 96.34–95.00 range, thereby allowing EUR/USD to rise above $1.1965.
Friday’s CPI release serves as the second catalyst. A weaker-than-anticipated inflation report would support the argument for rate cuts and maintain downward pressure on the dollar, further bolstering the rise in EUR/USD past the $1.19 level. An unexpectedly strong report would lead to a reassessment of rate-cut expectations, allowing the DXY to potentially revisit the $97.60 resistance level, while the pair may be pushed back toward the support zone of $1.1850–$1.1830. Until both numbers are established, the price movement around $1.19 indicates positioning and hedging rather than a strong directional belief. DXY is currently attempting to establish a base around $96.90 following a significant decline from the $97.99 peak. The 2-hour chart reveals candles with small bodies and extended lower wicks around $96.80, suggesting that buyers are actively protecting this level instead of giving in. The 38.2% Fibonacci retracement at $96.83 serves as the current intraday pivot, with the 50-period moving average approximately at $97.30 and the 100-period close to $97.60 establishing the resistance ceiling. A rising trendline from late January continues to provide support around $96.70. Should that level be breached, the subsequent target is positioned at $96.34. The DXY map for EUR/USD is quite clear. A sustained hold above $96.70 and a bounce toward $97.60 would limit Euro gains within the $1.1965–$1.2030 range and increase the likelihood of a retracement to $1.1850. A clean breakdown through 96.70 and then 96.34, particularly on weak NFP or CPI data, paves the way for a significant move in EUR/USD beyond 1.20 and towards the previous 1.2050 swing high. While DXY remains under the $97.60 threshold, the prevailing trend suggests a softer dollar, thereby reinforcing a positive outlook on the pair.
The movement of GBP/USD supports the same narrative. The pair is currently positioned at $1.3670 on the 2-hour chart, having struggled to maintain a breakout above the descending trendline originating from the $1.3870 peak. Price action indicates small candle bodies with upper wicks between $1.3690 and $1.3710, suggesting supply during intraday rallies while aggressive selling remains absent. The 50% Fibonacci retracement is positioned at $1.3655, serving as a significant pivot point, while the 50-period moving average remains stable at approximately $1.3660. The 100-period average around $1.3580 coincides with a rising trendline from mid-January, establishing a robust support zone. The relative strength of GBP/USD remaining above $1.3630, in the face of UK political distractions, indicates that the recent fluctuations in major currencies are largely influenced by the dollar component, rather than being solely attributed to the Euro or Pound narratives. Resistance is observed at $1.3710 followed by $1.3810, which currently limits upward movement. However, the buying interest around dips toward $1.3630–$1.3580 aligns with a wider trend of USD selling. The prevailing trend reinforces the interest in EUR/USD near $1.19, advocating for a strategy focused on purchasing during dips instead of capitalizing on peaks, particularly as the broader economic outlook continues to be unfavorable for the dollar. On the 2-hour timeframe, EUR/USD is currently stabilizing in the range of $1.1900–$1.1902 following a robust upward movement that almost reached $1.2050. Candlesticks around $1.19 exhibit small bodies and mixed wicks, indicating short-term indecision without a definitive reversal pattern. The pair continues to trade above a rising trendline established since mid-January, indicating that the overall trend remains positive.
A significant demand zone is positioned just beneath the current level at $1.1880–$1.1890, while the 50-period moving average remains nearly flat at $1.1885. The 100-period average is positioned lower, around $1.1835, aligning with significant trendline support, which establishes a robust buffer against potential declines. On the topside, the initial resistance is at $1.1965, with a more significant barrier located in the range of $1.2030–$1.2050. The RSI’s position near the 50 line following the recent rally indicates a neutral to slightly positive momentum profile, rather than signaling an overbought condition. Provided that EUR/USD remains above $1.1850–$1.1830 during any data-induced fluctuations, the trend framework supports revisiting $1.1965 and, in due course, another effort towards the $1.20–$1.2050 range. A daily close below $1.1830 would indicate the initial clear sign that the bullish trend is weakening and that the market may be gearing up for a more significant retracement.
Considering all the factors at play, the outlook for EUR/USD remains tilted towards the upside. The DXY remains constrained within the $96.70–$96.90 range, facing resistance at $97.30–$97.60 and at risk of further declines if the postponed NFP and CPI data do not bolster the dollar’s strength. Structural pressures from China’s gradual Treasury diversification, the post-election “Takaichi trade” in Japan, and easing Middle East tensions are diminishing the USD’s defensive premium. Within the Federal Reserve, Stephen Miran’s projection of potential cuts of up to 100 basis points in 2026 sustains rate-cut anticipations and exerts pressure on the dollar, extending its influence beyond the immediate data releases. From a technical perspective, EUR/USD has established a rising trend since mid-January, currently maintaining the $1.1880–$1.1890 demand zone, with notable upside targets at $1.1965 and $1.2030. The interplay of macroeconomic factors and the current chart configuration supports a positive outlook. Based on the current analysis, EUR/USD presents a buying opportunity with a bullish outlook as long as the pair remains above the $1.1850–$1.1830 range and DXY stays below $97.60. Immediate upside targets are set at $1.1965 and within the $1.20–$1.2050 range, with a medium-term scenario suggesting potential for further gains if DXY declines towards 95.00.