EUR/USD Price Forecast: Minor support sits at 1.1770
- EUR/USD faces some mild downside pressure, breaking below 1.1900.
- The US Dollar resumes its decline, reversing its earlier post-NFP advance
- US Nonfarm Payrolls (NFP) came in firmer than expected in January.
EUR/USD's rebound seems to have hit some small resistance just north of 1.1900, but the overall picture still points to further gains in the near future, with the immediate goal being the 1.2000 milestone.
EUR/USD adds to Tuesday’s decline, revisiting the area below 1.1900 the figure on Wednesday.
The pair’s humble retracement comes in tandem with decent losses in the Greenback, with the US Dollar (USD) giving away its earlier jump following stronger-than-expected US Nonfarm Payrolls in January.
Indeed, on the latter, the US economy added 130K jobs in quite an auspicious start to the year, while the Unemployment Rate ticked lower to 4.3%, and Average Hourly Earnings held steady at 3.7% over the last twelve months.
Fed on hold, confidence up, but no rush
The Fed left the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its January 28 meeting, fully in line with expectations.
The tone, however, was a touch more constructive. Policymakers sounded slightly more confident on growth, while still acknowledging that inflation remains somewhat elevated. Importantly, the Federal Open Market Committee (FOMC) no longer sees employment risks as deteriorating. The decision passed 10 to 2, with two dissenters preferring a 25 basis points cut.
Chair Jerome Powell made it clear that the current stance is viewed as appropriate. He reiterated that policy will be decided meeting by meeting, with no preset path. Recent inflation overshoots were largely attributed to tariff effects, while services disinflation is still seen as progressing. Crucially, no one on the Committee is treating a rate hike as the base case.
ECB steady, sticking to the script
The European Central Bank (ECB) also stayed put, leaving all three key rates unchanged in a unanimous and widely expected decision.
The message was steady and quiet. The medium-term forecast still says that inflation will return to the 2% objective, and the most recent data hasn't changed that. Wage indicators are still showing indications of stabilisation, although pricing for services and pay dynamics are still being closely watched. The Bank is still planning for a small drop in inflation in 2026, which supports the assumption that it can afford to wait.
President Christine Lagarde described risks as broadly balanced and stressed that policy remains data dependent and agile. The Governing Council acknowledged recent FX moves, judged them to be within historical norms, and reiterated that there is no exchange rate target. In other words, policy is not on autopilot, but neither is it in a hurry to move.
Positioning is still Euro positive, but losing some punch
Positioning continues to lean in favour of the Euro, although the momentum behind that bias appears to be softening.
According to the Commodity Futures Trading Commission (CFTC), speculative net long positions rose to around 163.4K contracts in the week to February 3, the highest since August 2023. At the same time, institutional accounts, largely hedge funds, lifted short positions to nearly 218.5K contracts, levels not seen since May 2023.
Open interest edged lower to roughly 910.5K contracts. That subtle drop suggests participation may be starting to plateau rather than accelerate further.
Focus back to the US, dollar risks linger
Near term: The US Dollar remains the dominant driver, while labour market data, inflation releases and the broader geopolitical backdrop are likely to shape price action in the sessions ahead.
Risks: A Fed that stays cautious for longer continues to underpin the Greenback, particularly against an ECB that is effectively in automatic pilot. On the charts, a clear break below the 200 day Simple Moving Average (SMA) would raise the probability of a deeper corrective move.
Tech corner
If buyers can keep control, EUR/USD could try to reach the 1.2000 level again. The next big hurdle is the 2026 high of 1.2082 (January 28). A clear break above that would bring the focus back to the May 2021 peak at 1.2266 (May 25) and then to the 2021 top at 1.2349 (January 6).
The first real cushion, on the other hand, is at 1.1775 on February 2. If the price goes below that, the 55-day and 100-day Simple Moving Averages at 1.1732 and 1.1681, respectively, would be exposed. The 200-day Simple Moving Average at 1.1625 is more important. If selling pressure continues to rise, the low from November 2025 at 1.1468 (November 5) and the low from August 2025 at 1.1391 (August 1) would probably come up again.
The backdrop still looks good from a momentum point of view. The Relative Strength Index (RSI) is around 57, which means that buyers are still in charge. The Average Directional Index (ADX) is just above 31, which means that the trend still has some strength behind it.
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Bottom line
For now, EUR/USD is being driven far more by the US narrative than by developments in the euro bloc.
For now, the Fed's 2026 rate path isn't apparent, and the euro region hasn't shown a strong cyclical comeback yet, so positive gains are likely to be slow instead of turning into a clean, sustained breakout.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
