EUR/USD Weekly Forecast: ECB decision and Trump to take centre stage

The EUR/USD pair soared in the last week of January, hitting a multi-year high of 1.2082 before finally retreating and trimming most of its weekly gains to settle around the 1.1900 level. The US Dollar (USD) gapped lower on Monday, on headlines suggesting the United States (US) intended to intervene in the Japanese Yen (JPY).

Intervention, Federal Reserve, and another shutdown

The US macroeconomic calendar was quite scarce in the last few days, but there were plenty of headlines triggering market action.

The week started with news indicating that the US Federal Reserve (Fed) conducted what market analysts considered a rate check. A rate check is a specific action in which currency authorities contact financial institutions to ask for the exchange rate they would quote if an intervention were to occur. The Fed asked banks in New York about their positions in USD/JPY, leading to speculation that the US may be preparing to work with Japan on the JPY's ongoing weakness.

The USD fell further following comments from US President Donald Trump on Tuesday. When asked about the latest USD weakness, Trump said he was not concerned about its decline, adding, “I think it’s great,” when referring to the USD value. The Greenback hit a four-year low before US Treasury Secretary Scott Bessent poured some cold water on the matter, saying Washington supports a strong USD policy a day later.

Meanwhile, the Fed had its first monetary policy of the year. The central bank kept the fed funds rate unchanged, floating between 3.50% and 3.75%, as expected. The accompanying statement showed policymakers believe uncertainty about the economic outlook remains elevated, as well as inflation.

Finally, Chairman Jerome Powell’s press conference was quite a disappointment, as journalists’ questions revolved around politics, Powell’s future, and the subpoena, all of which he refused to discuss. On a positive note, Powell noted a clear improvement ineconomic growth and diminished risks to both inflation and employment.

The USD weakness stemmed from multiple factors, including uncertainty about the next Fed Chair and expectations of additional rate cuts, tariffs, and geopolitical woes. The Greenback, however, found some footing in the second half of the week, as a sell-off in the tech sector revived the USD safe-haven condition, also backed by profit-taking ahead of the month-end.

US President Trump finally nominated former Fed Governor Kevin Warsh on Friday. The former Board member is well-known as a hawk, and his nomination immediately led to a near-term USD slide.

Meanwhile, the US federal government was on the verge of a partial shutdown again, although President Trump said that Republicans and Democrats in the Senate reached an agreement on a funding package on Friday. Encouraging headlines helped the Greenback to hold near a newly achieved three-day high.

Uncertainty indeed decreased by the end of the week, but from a fundamental side, it seems not enough to put the US Dollar on a bullish path. The Greenback could extend its ongoing corrective advance, but it is not the time to call for an interim bottom. Tariffs, geopolitical tensions, and what the Fed would do under Warsh remain as critical questions yet to be answered.

Europe fights back, economy improves

Across the pond, things were also busy. Mid-week, the President of the European Commission, Ursula von der Leyen, announced a major trade deal with India after two decades of on-and-off negotiations. The agreement comes after the European Union (EU) signed a similar pact with the South American bloc Mercosur. Such deals are a clear response to Washington's persistent pressure and tariff threats on the Old Continent. Trump’s usage of levies as leverage to seize Greenland seems to have been the last drop for the EU, which finally decided to fight back

Other than that, European data was quite encouraging, reviving hopes for a steadier recovery in the Union.

Germany released the GfK Consumer Confidence Survey, which improved in February to -24.1 from the previous -26.9, also beating expectations of -25.8.

More relevantly, the Eurozone economy expanded by 0.3% in the three months to December, according to the preliminary estimate of the Q4 Gross Domestic Product (GDP). In the same period, the GDP rose at an annual rate of 1.4%, matching the previous quarter’s print.

Germany's Q4 GDP grew by 0.3% on a quarterly basis and by 0.4% according to the annualized estimate, slightly better than the 0.2% and 0.3% anticipated. Finally, the country released the preliminary estimate of the January Harmonized Index of Consumer Prices (HICP), which fell by 0.1% MoM, following a 0.2% in December. The annual HICP was printed at 2.1%, slightly higher than the previous 2%.

What’s next in the docket

Monday kick starts with the US publishing the January ISM Manufacturing Purchasing Manager’s Index (PMI), forecast to tick modestly higher, but still indicating contraction, with the market’s consensus hinting at a 48.3 print. The ISM Services PMI is scheduled for Wednesday, when ADP will also publish the latest Employment Change survey.

In the meantime, the Eurozone HICP is scheduled for Tuesday, while the European Central Bank (ECB) will announce its decision on monetary policy on Thursday. The ECB is expected to leave interest rates unchanged, with the focus on President Christine Lagarde’s press conference. The odds for fresh new policy signs are quite limited, and the event is expected to have a limited impact on financial markets.

The US will close the week by publishing the January Nonfarm Payroll (NFP) report and the preliminary estimate of the February Michigan Consumer Sentiment Index on Friday. EUR/USD technical outlook

EUR/USD technical outlook

From a technical perspective, the daily chart of the EUR/USD pair suggests further corrective declines. The pair continues to trade above all its moving averages, with the 20-day Simple Moving Average (SMA) rising above the 100- and 200-day SMAs, while providing support at 1.1744. A flat 100-day SMA comes next at 1.1678. Technical indicators have turned sharply lower after reaching extreme levels. The Relative Strength Index (RSI) indicator is trending south yet remains above 61, still in positive territory. Finally, the Momentum indicator has cooled from recent highs but remains well above its midline, indicating that the advance is moderating rather than reversing.

In the weekly chart, the bullish strength has lost steam, but remains in place. EUR/USD trades above a mildly bullish 20-week SMA at 1.1674, which lies well above the 100- and 200-week SMAs. The longer moving averages slowly grind higher, reinforcing the long-term bullish structure. Meanwhile, the RSI indicator decelerated its advance but maintains a bullish slope around 63, consistent with another leg higher. Regarding the Momentum indicator, it extended its recent advance above its midline, also supportive of an upward extension. Initial resistance comes at around 1.1980, followed by the recent multi-year peak at 1.2082.

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