EUR/USD Price Forecast: US Dollar pressured by political noise

EUR/USD Current price: 1.1682

• United States political turmoil undermines demand for the US Dollar.
• Investors’ confidence in the EU improved in January, according to the Sentix index.
• EUR/USD recovered within range, bullish potential limited in the near term.

The US Dollar (USD) started the week on a weak note, with EUR/USD trading as high as 1.1695 on Monday, amid political turmoil in the United States (US).

On the one hand, the New York Times reported that Federal prosecutors opened a probe into Federal Reserve (Fed) Chair Jerome Powell over the renovation of the central bank’s headquarters in Washington. According to the investigation, there are suspicions that Powell misled Congress about the full scope and cost of the renovation project.

US President Donald Trump quickly said that he had no knowledge of these actions. “I don't know anything about it, but he's certainly not very good at the Fed, and he's not very good at building buildings,” Trump noted.

Chair Powell released a statement in which he said that he has deep respect for the law in the American democracy, adding that the renovation or his testimony are pretext and clearly noting that the criminal charges are a result of the Fed’s interest rate decisions based on their best assessments, “ rather than following the preferences of the President.”

On the other hand, US President Trump said during the weekend that the US will have Greenland “one way or the other,” adding annexing the Danish territory is “psychologically important for me.”

German Foreign Minister Johann Wadephul said Berlin would increase its Arctic commitments to ease Trump’s concerns over Russian and Chinese threats, while the  Federal Ministry of Finance, Lars Klingbeil, noted that the Transatlantic partnership is dissolving. Regardless US President Trump claims that the territory is critical for the US defense, the truth is Greenland is rich in minerals and other natural resources such as lithium and rare earth elements, one of Trump’s biggest obsessions.

On the data front, the EU published the January Sentix Investor Confidence Index, which improved to -1.8 from the -6.2 posted in December, reaching its highest level since July 2025.

The American session will bring no relevant data, but a couple of the Fed’s speakers. The US, however, will release Consumer Price Index (CPI) data on Tuesday and Retail Sales figures on Wednesday.

EUR/USD short-term technical outlook

In the 4-hour chart, EUR/USD is technically neutral. The pair holds on to most of its intraday gains and trades just above a flat 20-period Simple Moving Average (SMA), providing support at 1.1666. At the same time, the pair develops below the 100- and 200-period ones, at 1.1729 and 1.1689, respectively. The Momentum indicator recovered from negative readings and edges marginally higher, but holds within neutral levels, hinting at waning bearish pressure. The Relative Strength Index (RSI) indicator offers a similar picture, sitting at 52.

In the daily chart, EUR/USD trades below a mildly bearish 20-day SMA, but still stands above the 100- and 200-day SMAs, which trend higher. At the same time, the Momentum indicator aims higher below its midline, while the RSI indicator also advances, currently at around 47. Indicators suggest that there is fading selling interest, but they can not confirm additional gains. Immediate resistance aligns with the 20-day SMA at 1.1729, while initial support rests at the 100-day SMA at 1.1667.

(The technical analysis of this story was written with the help of an AI tool.)