EUR/USD Weekly Forecast: US Dollar future in the hands of Trump

The EUR/USD pair fell to a fresh January low of 1.1593, closing the week a handful of pips above the 1.1600 mark. Sellers defended the upside at around the 1.1700 level for a second consecutive week, despite broad US Dollar (USD) weakness. Overall, it was a dull week in terms of price action, regardless of the excess of political and macroeconomic headlines.

Trump amplifies geopolitical noise

United States (US) President Donald Trump did not stop after taking over Venezuela a couple of weeks ago. Not only did he continue his campaign to seize Greenland, but added Iran to the list of countries in which he is willing to intervene.

Protests in the Middle Eastern country began at the end of December 2025, after the Iranian rial plunged to record lows. The deterioration of the local economy was the initial catalyst, but escalated and spread like wildfire throughout the country, becoming a massive fight against the theocratic government. The latter violent response resulted in what the world believes are thousands of deaths. US President Trump threatened military intervention, warning that if the government keeps “violently kills peaceful protesters,” the US “will come to their rescue.” As days went by, Trump downed the tone, saying that the killing appeared to be ending. Still, the White House stressed that “all options remain on the table.”

The Federal Reserve holds the key

Political noise also from the inside: The US Department of Justice (DoJ) served the Federal Reserve (Fed) with subpoenas and threatened a criminal indictment on Chair Jerome Powell for his testimony before Congress regarding the Fed’s headquarters renovation. In an unprecedented move, Powell responded by openly saying that such a probe is the result of the Fed’s refusal to cut interest rates at a faster pace.

Powell said he believed it was opened due to Donald Trump's anger over the Fed's refusal to cut interest rates despite repeated public pressure from the president.

The indictment had a relatively low negative impact on market sentiment. And there’s a reason why: Chairman Jerome Powell’s mandate will end this May. Whoever will come after him remains a mystery, as President Trump keeps saying he will “soon” announce Powell’s successor, but that “soon” never arrives.

And for sure, Powell’s successor is the key to the USD's next trend. Speculative interest is currently overwhelmed by uncertainty about what the central bank would or would not do next. Fed officials had hinted at one rate cut in 2026 and no action in the first meeting of the year. Investors maintain bets of at least two rate cuts throughout the year, but don’t expect any action in January.

Whether the next Fed head will lean hawkish or dovish remains a mystery. And as long as the mystery continues, market participants have no new bets to place, partially explaining the current stalemate across the FX board.

Unimpressive data adds to dull trading

Data releases have been well short of interesting these last few days. The US reported December Consumer Price Index (CPI) figures that came in pretty much in line with the market expectations, yet still signaled that price pressures remain sticky. Annualized inflation, as measured by the CPI, rose by 2.7% in the twelve months to December, while the core reading printed at 2.6%. On a monthly basis, the CPI rose by 0.3%, with the three readings matching November’s figures.

The US also released November Retail Sales, which rose by 0.6%, improving from a revised -0.1% in October. However, Retail Sales Control Group, the smoothed figure, came in at 0.4%, shrinking from the previous 0.6%.

Finally, the US published October and November Producer Price Index (PPI) data, with the annual core PPI standing at 3% YoY.

Little data came from Europe that could have shaped the Euro’s (EUR) direction. Germany published the final estimate of the Harmonized Index of Consumer Prices (HICP), confirming an annualized advance of 2% in December, while the real Gross Domestic Product (GDP) rose 0.2% from a previous -0.5% revised.

The Eurozone Sentix Investor Confidence index improved in January to -1.8 from the previous -6.2, while Industrial Production in the bloc rose by 0.7% MoM in November.

What’s next in the docket

From the European side, the macroeconomic calendar will include the final Eurozone HICP for December, German PPI for the same month, the German ZEW survey on Economic Sentiment, and the preliminary estimate of the January Consumer Confidence in the Euro bloc.

Meanwhile, the Davos Economic Forum will start on Monday, featuring speeches from European Central Bank (ECB) President Christine Lagarde and other top-tier policymakers from around the world.

The US will have quite a busy Thursday, with the usual weekly unemployment figures, a revision of Q3 GDP, and the October and November Personal Consumption Expenditures (PCE) Price Index data.

Finally, on Friday, S&P Global will publish the preliminary estimates of the January Purchasing Managers’ Indexes (PMIs).

EUR/USD technical outlook

The EUR/USD pair has shown little signs of life in the last few days, but closed in the red for a third consecutive week. From a technical point of view, the risk skews to the downside as, in the daily chart, the pair trades below its 20 and 100 Simple Moving Averages (SMA) while barely holding above a bullish 200 SMA. The 20-day SMA has turned lower while remaining above the 100-day SMA, indicating waning near-term momentum and providing dynamic resistance at 1.1708 and 1.1665, respectively. At the same time, technical indicators remain well below their midlines, bouncing modestly on the last day of the week, not enough to suggest an upcoming advance. A break below the 200-day SMA at 1.1585 should open the door for an extended slide, with 1.1470, a strong static support area, in sight.

In the weekly chart, EUR/USD trades below the 20-week Simple Moving Average (SMA), which has flattened near 1.1662, containing advances. The 100- and 200-week SMAs continue to rise below the current price, although the momentum is waning. Meanwhile, the Momentum indicator remains stuck around its midline, while the Relative Strength Index (RSI) indicator aims south at around 52, suggesting contained directional conviction. A weekly close back above the 20-week SMA could reassert the advance, with higher chances of a bullish extension once the pair breaks through the January peak at 1.1765.

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