EUR/USD Price Forecast: Next stop, 1.2000
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UPGRADE- EUR/USD adds to Friday’s uptick and advances past the 1.1900 yardstick.
- The US Dollar comes under renewed downside pressure post-Japan elections.
- Investors’ attention shifts to the upcoming US NFP and CPI data.
EUR/USD is finding its footing again, pushing to multi-day highs as it claws back part of the ground lost during last week’s so-called “Warsh trade” and turns its attention back toward the key 1.2000 area.
In quite an auspicious start to the week, EUR/USD adds to Friday’s advance, managing to reclaim the 1.1900 barrier and beyond in a context of a generalised offered stance in the US Dollar (USD).
Indeed, the Greenback continues to suffer the increasing speculation of further interest rate cuts by the Federal Reserve (Fed), while the strong appreciation of the Japanese Yen (JPY) in the wake of the Japanese elections on Sunday also adds to the sour mood around the buck on Monday.
That said, the US Dollar Index (DXY) recedes to multi-day lows, breaking below the 97.00 support once again amid the downtick in US Treasury yields in the short end and the belly of the curve.
Fed, confident tone, but in no rush
The Federal Reserve kept the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its January 28 meeting, exactly as markets had expected.
That said, rate setters struck a slightly more upbeat tone on growth, while inflation was still characterised as somewhat elevated. Crucially, the Federal Open Market Committee (FOMC) no longer sees risks to employment as worsening. Additionally, the decision passed by a 10 to 2 vote, with two members dissenting in favour of a 25 basis points cut.
Chair Jerome Powell said the current policy stance remains appropriate and stressed that decisions will continue to be taken meeting by meeting, with no preset path. He played down recent inflation overshoots as largely tariff-driven, noting that services disinflation is still progressing and that no one on the Committee sees a rate hike as the base case.
ECB, on hold and watching closely
The European Central Bank (ECB) also left all three policy rates unchanged, delivering a unanimous decision that met expectations.
In fact, policymakers reiterated that inflation remains on track to stabilise at the 2% target over the medium term, with nothing in the latest data materially altering the baseline outlook. In addition, wage indicators continue to point towards moderation, even as service prices and wage dynamics remain under close scrutiny. Furthermore, the central bank still factors in some inflation undershoot in 2026.
Speaking after the meeting, President Christine Lagarde said risks are broadly balanced and underlined that policy remains agile and data dependent. The Governing Council (GC) discussed recent FX moves, judged them to be well within historical ranges, and reiterated that there is no exchange rate target, reinforcing the message that policy is not on a predetermined course.
Positioning, still supportive, but momentum easing
Positioning data continue to lean in favour of the Euro (EUR), although the pace of enthusiasm appears to be slowing.
According to the Commodity Futures Trading Commission (CFTC), speculative net long positions rose to around 163.4K contracts in the week ended February 3, the highest level since August 2023. At the same time, institutional players (mostly hedge funds) increased their short positions to nearly 218.5K contracts for the first time since May 2023.
Additionally, open interest eased modestly to around 910.5K contracts, suggesting that overall participation may be starting to lose some momentum.
The weekly performance of volume and open interest in the single currency underpins the recent uptick. This view has also been confirmed in the weekly figures from the CFTC positioning report.
What to watch next
Near term: The focus remains firmly on the US Dollar side of the equation, as markets are looking ahead to incoming US data, particularly labour market releases and inflation prints.
Risks: A longer-than-expected cautious stance from the Fed should keep spot under scrutiny. From a technical perspective, a decisive break below the 200 day Simple Moving Average (SMA) would also raise the risk of a deeper correction.
Tech corner
On the upside, the 1.2000 threshold could come back into focus in the not too distant future. Once that area is cleared, EUR/USD may attempt a move toward the 2026 ceiling at 1.2082 from January 28, ahead of the May 2021 peak at 1.2266 from May 25 and the 2021 top at 1.2349 from January 6.
On the downside, initial support sits at the February floor at 1.1775 from February 2. A break below this level would expose the provisional 55 day and 100 day Simple Moving Averages at 1.1718 and 1.1678, respectively, ahead of the key 200 day Simple Moving Average at 1.1619. Below that, attention shifts to the November 2025 base at 1.1468 from November 5, followed by the August 2025 low at 1.1391 from August 1.
Momentum indicators remain constructive. The Relative Strength Index is edging toward the low 60s, while the Average Directional Index above 31 points to a fairly solid underlying trend.
Bottom line
For now, EUR/USD continues to be driven far more by developments in the US than by anything coming out of the euro area.
Until the Fed provides clearer guidance on its 2026 rate path, or the euro area delivers a more convincing cyclical upswing, any upside is likely to remain gradual rather than turning into a clean and decisive breakout.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- EUR/USD adds to Friday’s uptick and advances past the 1.1900 yardstick.
- The US Dollar comes under renewed downside pressure post-Japan elections.
- Investors’ attention shifts to the upcoming US NFP and CPI data.
EUR/USD is finding its footing again, pushing to multi-day highs as it claws back part of the ground lost during last week’s so-called “Warsh trade” and turns its attention back toward the key 1.2000 area.
In quite an auspicious start to the week, EUR/USD adds to Friday’s advance, managing to reclaim the 1.1900 barrier and beyond in a context of a generalised offered stance in the US Dollar (USD).
Indeed, the Greenback continues to suffer the increasing speculation of further interest rate cuts by the Federal Reserve (Fed), while the strong appreciation of the Japanese Yen (JPY) in the wake of the Japanese elections on Sunday also adds to the sour mood around the buck on Monday.
That said, the US Dollar Index (DXY) recedes to multi-day lows, breaking below the 97.00 support once again amid the downtick in US Treasury yields in the short end and the belly of the curve.
Fed, confident tone, but in no rush
The Federal Reserve kept the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its January 28 meeting, exactly as markets had expected.
That said, rate setters struck a slightly more upbeat tone on growth, while inflation was still characterised as somewhat elevated. Crucially, the Federal Open Market Committee (FOMC) no longer sees risks to employment as worsening. Additionally, the decision passed by a 10 to 2 vote, with two members dissenting in favour of a 25 basis points cut.
Chair Jerome Powell said the current policy stance remains appropriate and stressed that decisions will continue to be taken meeting by meeting, with no preset path. He played down recent inflation overshoots as largely tariff-driven, noting that services disinflation is still progressing and that no one on the Committee sees a rate hike as the base case.
ECB, on hold and watching closely
The European Central Bank (ECB) also left all three policy rates unchanged, delivering a unanimous decision that met expectations.
In fact, policymakers reiterated that inflation remains on track to stabilise at the 2% target over the medium term, with nothing in the latest data materially altering the baseline outlook. In addition, wage indicators continue to point towards moderation, even as service prices and wage dynamics remain under close scrutiny. Furthermore, the central bank still factors in some inflation undershoot in 2026.
Speaking after the meeting, President Christine Lagarde said risks are broadly balanced and underlined that policy remains agile and data dependent. The Governing Council (GC) discussed recent FX moves, judged them to be well within historical ranges, and reiterated that there is no exchange rate target, reinforcing the message that policy is not on a predetermined course.
Positioning, still supportive, but momentum easing
Positioning data continue to lean in favour of the Euro (EUR), although the pace of enthusiasm appears to be slowing.
According to the Commodity Futures Trading Commission (CFTC), speculative net long positions rose to around 163.4K contracts in the week ended February 3, the highest level since August 2023. At the same time, institutional players (mostly hedge funds) increased their short positions to nearly 218.5K contracts for the first time since May 2023.
Additionally, open interest eased modestly to around 910.5K contracts, suggesting that overall participation may be starting to lose some momentum.
The weekly performance of volume and open interest in the single currency underpins the recent uptick. This view has also been confirmed in the weekly figures from the CFTC positioning report.
What to watch next
Near term: The focus remains firmly on the US Dollar side of the equation, as markets are looking ahead to incoming US data, particularly labour market releases and inflation prints.
Risks: A longer-than-expected cautious stance from the Fed should keep spot under scrutiny. From a technical perspective, a decisive break below the 200 day Simple Moving Average (SMA) would also raise the risk of a deeper correction.
Tech corner
On the upside, the 1.2000 threshold could come back into focus in the not too distant future. Once that area is cleared, EUR/USD may attempt a move toward the 2026 ceiling at 1.2082 from January 28, ahead of the May 2021 peak at 1.2266 from May 25 and the 2021 top at 1.2349 from January 6.
On the downside, initial support sits at the February floor at 1.1775 from February 2. A break below this level would expose the provisional 55 day and 100 day Simple Moving Averages at 1.1718 and 1.1678, respectively, ahead of the key 200 day Simple Moving Average at 1.1619. Below that, attention shifts to the November 2025 base at 1.1468 from November 5, followed by the August 2025 low at 1.1391 from August 1.
Momentum indicators remain constructive. The Relative Strength Index is edging toward the low 60s, while the Average Directional Index above 31 points to a fairly solid underlying trend.
Bottom line
For now, EUR/USD continues to be driven far more by developments in the US than by anything coming out of the euro area.
Until the Fed provides clearer guidance on its 2026 rate path, or the euro area delivers a more convincing cyclical upswing, any upside is likely to remain gradual rather than turning into a clean and decisive breakout.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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