- US dollar weakens as trade war fears and Fed independence concerns pressure sentiment.
- EUR/USD may resume an uptrend if price holds above the 1.17 resistance zone.
- US GDP and PCE data could shape rate cut expectations and near term currency direction.
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On Monday, the US dollar weakened slightly against the euro and the British pound. The greenback is under pressure mainly because of growing fears of a new trade war between the United States and the European Union. Investors appear to be reacting in a similar way to April last year, when the US dollar also weakened, though this time the move looks smaller.
Attention is also on a legal dispute over efforts to remove Lisa Cook from the Board of Governors of the Federal Reserve. The case will be heard by the Supreme Court of the United States and is seen as a test of how much influence the US President can exert over the Fed’s independence. If the ruling goes in his favor, the US dollar is likely to weaken further.
Meanwhile, the US stock market continues to move through the fourth quarter 2025 earnings season this week, alongside several key macroeconomic data releases that could shape market sentiment.
EURUSD: Will it return to an upward trend?
The currency markets were fairly calm at the start of the week because of Martin Luther King Day in the United States. Volatility is likely to pick up in the days ahead.
Several factors could weigh on the US dollar. These include the risk of renewed geopolitical tensions linked to Greenland or Iran, as well as economic risks from a possible trade dispute with the European Union. Since the holiday period, the euro has been correcting against the US dollar.
If breaks above the 1.17 level and holds there, the corrective phase may end, and the pair could return to an upward trend, especially if more severe scenarios begin to take shape.
Later this month, the Federal Reserve will hold its next policy meeting. Markets see a very high chance that interest rates will remain unchanged. Alongside the ongoing dispute involving Lisa Cook, speculation continues around who will succeed Jerome Powell as Fed Chair later this year. One name often mentioned is Kevin Hassett, though Donald Trump recently suggested he may prefer to keep Hassett in his current role, adding more uncertainty to the outlook.
GDP and PCE on This Week’s Macro Calendar
On Thursday, the United States will release new macroeconomic data on growth and , the preferred inflation measure of the Federal Reserve.
Forecasts remain cautiously optimistic. Price pressures are expected to stay contained, while economic growth is likely to remain solid.
If we assume an upward move in EUR/USD, the incoming data would need to support the case for interest rate cuts by the . In this scenario, the key factor would be inflation moving in a way that strengthens expectations of easier monetary policy.
Reversal on EUR/USD
After breaking above the local downtrend line, buyers have sent a clear signal that they want to push the market back into an upward trend. The focus is now on the first resistance area, which sits around the 1.17 level.
If this area is broken, the path opens toward the 1.1740 level. If the current momentum holds, any pullbacks are likely to stay limited, as the rising uptrend line continues to provide strong support.
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