• The EUR/USD price analysis suggests strong bullish momentum, heading towards 1.1900 amid broad dollar weakness.
• Eurozone data remained mixed, keeping the ECB steady instead of supportive.
• Markets eye the FOMC rate decision and press conference this week as a major event.

The EUR/USD price is trading higher mainly amid a weaker dollar, not because the Euro area has turned decisively stronger. The pair is up about 0.26% to around 1.1860, while the DXY is around 97.00, which is the lowest level in about four months. The driver is ongoing investor worry about US trade relations and policy uncertainty, even though some recent tensions between the US and the EU have calmed down.

The Fed’s decision on Wednesday is the major event this week. The markets anticipate the Fed will keep rates between 3.50% and 3.75%. This would be the first time rates stayed the same after three cuts in late 2025 that added up to 75 bps. The reaction function is more important than the rate decision now that the hold is mostly priced in. Traders will pay attention to how Powell communicates about inflation, the job market, and whether the committee is open to confirming or pushing back against expectations for easing in the near future.

Political and institutional risk adds yet another level of complexity to USD pricing. The Fed is facing significant pressure and unusual legal challenges. The markets remain concerned about independence optics and policy credibility. That backdrop could keep the dollar down until something significant happens. However, things could go the other way quickly if the Fed seems united and strong.

The next factors to watch for on the euro side are the first estimates of Eurozone GDP for Q4 and Germany’s HICP for January. The recent data is not all good. The Eurozone services PMI fell to 51.9. Germany’s services beat expectations, and manufacturing improved but stayed in contraction. In December, Germany’s industrial production fell by 0.7%, which was a surprise. This makes it harder to argue for a tighter ECB policy and keeps ECB expectations steady instead of supportive.

On the other hand, the US still looks strong compared to other countries, with a strong December payrolls print of 210k. If the Fed sounds even a little hawkish, that difference could come back quickly.

Overall, this week is a battle between weak USD sentiment going into the Fed meeting and the probability that trade news or stronger Fed communication will bring back the dollar’s safe-haven bid and limit EURUSD rallies.
 

EUR/USD Technical Price Analysis: Pullback Before Further Upside
 

(Click on image to enlarge)

EUR/USD 4-hour chart
 

The EUR/USD price is currently consolidating above the mid-1.1800 level after reaching a multi-month high near 1.1900 and subsequently bouncing from a strong supply zone. The pair formed a bearish pin bar while leaving a bullish gap near 1.1825.

The RSI indicates an extreme overbought condition, which could lead to a pullback to fill the gap at 1.1825 before testing the supply-turned-demand zone near 1.1800. However, the broader trend remains bullish while staying well above the key MAs. The buyers could aim to pierce the 2025 highs near 1.1930 to test the psychological mark at 1.2000.

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