EUR/USD Holds Higher Lows, Eyeing Upside Breakout

Summary:

EUR/USD rises near 1.1980 as US Dollar weakness persists amid Trump’s Fed uncertainty, while market eyes Eurozone consumer data and US jobless claims. Traders brace for volatility ahead of economic releases and policy signals.

Buy EURUSD

End Time

CLOSED

1.19603

ENTRY

1.22000

TGT

1.19000

1.17883 -0.00015 -0.01%

603

Points

Loss

1.19000

CLOSING

1.19603

ENTRY

1.22000

TGT

The EUR/USD pair traded on a positive footing near 1.1980 in early European session trade on Thursday, bolstered by broad US Dollar (USD) weakness and ongoing uncertainty surrounding US economic policy. Investors are navigating a complex backdrop, with the Eurozone set to release Consumer Confidence data later in the day, while the US reports Initial Jobless Claims, Nonfarm Productivity, and Unit Labor Costs for the third quarter.

The Greenback’s retreat continues to reflect market caution over US President Donald Trump’s policy unpredictability and the independence of the Federal Reserve (Fed), which has fueled gains in major USD pairs. On Tuesday, Trump signaled that he would soon announce his pick for the next Fed Chair, adding that he expects interest rates to drop significantly once a new chair is installed. These remarks have added to market speculation that the Fed’s policy trajectory could shift abruptly under political influence, contributing to the Dollar’s soft tone.

Despite these political pressures, the Federal Reserve opted to leave its benchmark rate unchanged at 3.50%-3.75% during its January policy meeting on Wednesday. Fed Chair Jerome Powell emphasized in the subsequent press conference that while economic activity appears to have improved since the last gathering, signs of labor market cooling remain. Powell’s remarks painted a cautiously balanced outlook, noting stabilization in employment alongside slowing wage pressures, suggesting that the central bank may take a measured approach to future rate adjustments.

Fed officials further signaled that rate reductions are not imminent, with markets largely pricing in a potential adjustment no earlier than June. This hawkish-hold stance may temper further USD losses in the near term, though investor attention remains fixed on policy clarity and the implications of any political intervention in the Fed’s decision-making process.

Across the Atlantic, the Eurozone continues to maintain steady growth momentum, even amid muted inflation pressures. Economists widely expect the European Central Bank (ECB) to hold rates steady at its February meeting, and the central bank has indicated that current rates are in a “good place” to support medium-term price stability. This dovish-but-stable tone, coupled with USD fragility, underpins the EUR’s resilience against its American counterpart.

Technical and sentiment factors are also shaping market dynamics. The US Dollar Index (DXY), which tracks the USD against six major currencies, is holding near 96.38, showing modest stability but lacking the strength to offset Euro gains. Traders are closely monitoring upcoming US data, including weekly jobless claims, Q3 Nonfarm Productivity, and Unit Labor Costs, for clues on underlying economic momentum and potential shifts in Fed policy expectations.

Market participants face a delicate balancing act. On one hand, the Euro remains supported by the USD’s political and policy-related vulnerabilities; on the other, the Fed’s deliberate pace and ECB’s steady guidance suggest that both central banks are in a holding pattern. This environment favors a range-bound EUR/USD, with price action likely to remain sensitive to headlines around Fed leadership and economic surprises from either side of the Atlantic.

Analysts suggest that any hawkish signals from the Fed—or clarification regarding the independence of the central bank—could temporarily bolster the USD and weigh on EUR/USD. Conversely, continued political uncertainty in Washington and firm European data may keep the pair elevated toward 1.2000–1.2050 in the near term. Traders are advised to track both economic releases and geopolitical developments closely, as these remain the primary drivers of intraday volatility.

Technical Analysis

From a technical perspective, EUR/USD remains positioned within a broader bullish continuation structure on the 4-hour chart. Following a strong impulsive rally from the 1.1600 region, price has transitioned into a controlled consolidation phase, forming a descending channel / bullish flag just beneath the 1.2000 psychological level. This type of corrective structure typically reflects profit-taking rather than trend exhaustion, and it preserves the integrity of the prevailing uptrend.

Price is currently oscillating around the 1.1950–1.1970 zone, which has emerged as an important short-term equilibrium area. This zone aligns with prior breakout structure and is acting as key demand, repeatedly absorbing downside attempts. As long as price holds above the 1.1920–1.1900 support band, the bullish market structure remains intact. A decisive 4-hour close below this region would signal a breakdown from the flag and open the door for a deeper corrective move toward 1.1850, followed by 1.1800, where previous consolidation and institutional demand are located.

On the upside, the 1.2000 round number remains the immediate cap. This level has repeatedly rejected price and coincides with the upper boundary of the corrective channel. A clean breakout and sustained hold above 1.2000 would confirm continuation and likely trigger momentum-driven buying. In that scenario, upside targets extend toward the 1.2050–1.2100 zone, with the broader bullish objective resting near the 1.2200 resistance area, highlighted on the chart as a higher-timeframe supply zone.

Overall, price action suggests compression rather than distribution. The sequence of higher lows, shallow pullbacks, and tightening range favors an upside resolution, provided key structural support remains defended. Until a breakdown occurs, the bias remains bullish with consolidation rather than reversal.

TRADE RECOMMENDATION

BUY EUR/USD

ENTRY PRICE: 1.1960

STOP LOSS: 1.1900

TAKE PROFIT: 1.2200

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

2079

Win Rate

63.23%

P/L Ratio

0.72

Focus on

XAUUSD, EURUSD, GBPUSD

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