EUR/USD Price Forecast - Eur Tests 1.17 as Fed Independence Shock and $4,600 Gold Hammer the Dollar

EUR/USD: political shock, gold at $4,600 and a crowded march toward 1.17

Macro backdrop: Fed independence crisis and why it weakens USD against EUR

EUR/USD trades in a tight but tense band around 1.1650–1.1700, recovering from last week’s low at 1.1617 and repeatedly probing the 1.1690–1.1700 region. The move is not driven by classic growth or rate differentials alone; it is driven by a direct institutional shock to the US Dollar. Federal prosecutors have threatened criminal charges against Jerome Powell over his June 2025 Senate testimony on a 2.5 billion dollar renovation of the Fed’s headquarters. Powell’s own statement that this is a pretext linked to political pressure over rates turns a legal case into an attack on Fed independence. Markets are repricing the credibility of the US as a monetary anchor, and that repricing hits USD across the board. Because the euro carries roughly fifty seven percent weight in the dollar index, EUR/USD is the cleanest vehicle to express that institutional risk. When investors cut USD exposure on governance grounds and seek alternatives, EUR naturally absorbs a large share of that flow, keeping the pair supported even when intraday dips drag it back toward 1.1680 after tests of 1.1700.

Geopolitics, safe havens and the EUR leg of the trade

The same geopolitical layer that has pushed gold through 4,600 dollars per ounce is also shaping the EUR side of the equation. A US operation in Venezuela, mass casualties in protests across Iran and a worsening Russia–Ukraine front with drone and missile strikes near NATO borders all lift global risk premia. China’s decision to limit rare-earth exports to Japan adds a structural supply-chain threat. Under normal conditions, this kind of stress would reinforce demand for USD as the dominant safe-haven currency. This time, the institutional shock at the Fed diverts part of that demand into gold and away from the dollar. XAU/USD trades near record highs around 4,580–4,600 dollars, while EUR/USD grinds higher not because Europe is booming but because USD has become a less pure safe asset. The euro is effectively the “least bad” liquid alternative, which is enough to keep a bid under the pair as long as the political conflict between the administration and the Fed remains unresolved.

US data, inflation risk and how they cap EUR/USD upside

Macro data are not giving the dollar a free pass to collapse. The latest US labour report showed nonfarm payrolls up by roughly fifty thousand in December, well under forecasts, but the unemployment rate dropped to about 4.4 percent. That mix undermines the case for rapid and aggressive cuts but does not restore full confidence in USD while the Powell investigation dominates the narrative. The next catalyst is inflation. Markets are locked on upcoming CPI and PPI prints. If CPI and PPI undershoot, the combination of weaker data and political pressure locks in expectations for cuts later in 2026 and allows EUR/USD to extend above 1.17. If inflation surprises on the upside, the pair will face a conflicting signal: a hawkish data impulse in a politically damaged dollar. In that scenario, the first reaction is likely to be a fast correction lower in EUR/USD as crowded longs de-risk rather than an immediate, clean USD bull trend. The data risk therefore acts as a cap on immediate euro upside even while the structural story favours a softer dollar.

Eurozone sentiment: less pessimism, not a boom, supports EUR

Inside the eurozone, the macro story is one of gradual stabilisation rather than spectacular strength. The Sentix Economic Confidence Index for January improved from minus 6.2 to minus 1.8, the best reading in six months. The index is still below zero, so investors are not bullish on eurozone growth, but the trend is moving away from deep pessimism. For EUR, that matters. It reduces tail risks around recession and makes it easier for investors to rotate into the single currency when USD is damaged for political reasons. No one is buying EUR here because Europe is a high-growth story; they are buying it because it is a large, liquid currency backed by a system that, at least for now, is not engaged in open warfare with its own central bank.

Futures positioning: EUR longs at extremes and what that means for EUR/USD

Commitment of Traders data show how stretched the positioning has become behind this move. Large speculators have been net-short the US Dollar Index since June, but that short has already been reduced by around three quarters to roughly minus thirty eight thousand contracts, which means the one-way bearish dollar view has matured. On the euro side, net-long exposure in EUR futures is at an eighteen-month high for large speculators and a fifteen-month high for asset managers. Gross long positions have climbed to record levels for both groups. This is the definition of a crowded trade. When positioning is this extended, incremental upside in EUR/USD needs fresh capital or forced covering by residual shorts; otherwise, the market becomes vulnerable to profit-taking cascades. Any upside surprise in US data, any sign of de-escalation in the political fight around the Fed or even a temporary easing of geopolitical pressure can prompt a quick thirty to one hundred pip washout as leveraged longs take risk off. The fundamental story may still favour a weaker dollar, but the path is no longer clean or linear because positioning risk is now as important as macro risk.

Spot structure and key levels: EUR/USD pinned between 1.1617 and the 1.18 supply zone

From a pure price-action standpoint, EUR/USD is trying to consolidate a bullish turn without breaking its broader range. Spot trades around 1.1655–1.1690, up from last week’s low at 1.1617 but still capped by the 1.17 handle. The 100-day exponential moving average sits close to 1.1665 and is edging higher. That rising 100-day average signals an improving medium-term bias but is also acting as immediate resistance. Price action is clustered near the lower Bollinger Band around 1.1650, which shows that the recent downside stretch is stabilising even as volatility expands. Above current levels, the middle Bollinger band near 1.1728 and the upper band around 1.1817 define the next resistance zone. Only a decisive daily close through that 1.1728–1.1817 area would confirm a meaningful transition into an extended upside leg rather than a noisy range.

Short-term momentum: intraday rebound, overbought risk and the 1.1675 pivot

On shorter timeframes, the pair has already delivered a cleaner bullish signal. EUR/USD broke a descending trendline on the one-hour chart, reclaimed the 20-period EMA and is now probing the 50-period EMA cluster around 1.1673–1.1680. That area aligns with the 38.2 percent Fibonacci retracement of the latest downswing, making 1.1675–1.1680 the key intraday pivot. Above that band, the short-term structure favours the bulls; below it, the rebound risks fading back toward last week’s lows. Momentum indicators back this view but also flag overheating. Intraday RSI readings stand near 69, signalling strong buying pressure but also warning that the market is close to overbought. In practice, that configuration often resolves through sideways consolidation or a pullback before another attempt higher, particularly with binary events such as US CPI looming. Immediate resistance rests around 1.1737 and then 1.1789, while support in the near term comes in just under 1.1640–1.1644.

Downside risk map: where the bullish EUR/USD narrative breaks

The structure on the downside is well defined and critical for risk management. The first level that matters is the 1.1640–1.1644 band, which coincides with the lower edge of the recent breakout zone and the lower Bollinger on intraday charts. As long as daily closes hold above that band, dips look like corrective noise within a still-constructive setup. A break and daily close under 1.1615–1.1617, last week’s low, would send a different message. That would confirm that the latest recovery toward 1.17 was just a corrective bounce in a broader range and reopen space for a move toward the mid-1.15s. Given how crowded euro longs are, a break of 1.1617 would likely trigger stop runs and forced selling, making a move to 1.1550 or lower possible without any dramatic shift in macro data, simply through position clearing.

Tactical stance on EUR/USD: bullish bias, but only as a disciplined, tactical Buy

Combining the macro, positioning and technical layers leads to a clear but nuanced stance. Politically driven damage to Fed credibility, gold at record highs above 4,560–4,600 dollars per ounce and a weakening US Dollar Index provide a structural tailwind to EUR/USD. Eurozone sentiment is no longer collapsing, as shown by the Sentix improvement from minus 6.2 to minus 1.8, which supports the euro as a credible alternative. Technically, the pair is holding above 1.1640, has defended 1.1617 and is trying to build a base around 1.1675–1.1680 with upside reference points at 1.1737, 1.1789 and the broader 1.18–1.1820 supply zone. Against that, speculative and asset-manager positioning in EUR futures is stretched to multi-year extremes, making the trade vulnerable to sharp shake-outs whenever data or politics temporarily favour the dollar. The correct interpretation of the current tape is a Buy bias on EUR/USD, but only on a tactical, disciplined basis. The attractive zone is a pullback into 1.1675–1.1650 with upside focus on a test of 1.1737 and then 1.1789 and the 1.18 region, while structural risk is defined below 1.1615 where the latest rebound fails. The directional verdict on the current data and price structure is bullish, yet the position must be sized and managed as a crowded, politically driven trade rather than a clean, early-cycle macro long.

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