EUR/USD Recovers as Chair Powell Remains Willing to Adjust Policy

US Dollar Outlook: EUR/USD

EUR/USD retraces the decline from the start of the week as Federal Reserve Chairman Jerome Powell reiterates that ‘we do not need to be in a hurry to adjust our policy stance’ while testifying in front of Congress.

EUR/USD Recovers as Chair Powell Remains Willing to Adjust Policy

EUR/USD trades to a fresh weekly high (1.0344) as Chairman Powell tells US lawmakers that ‘we will adjust our policy stance in a manner that best promotes our maximum-employment and price-stability goals,’ and it seems as though the Federal Open Market Committee (FOMC) will continue to pursue a less restrictive policy as the central bank remains ‘committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored.’

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

In turn, the US Dollar may face headwinds ahead of the next Fed meeting in March as the Fed appears to be on track to implement lower US interest rates in 2025, and the update to the Consumer Price Index (CPI) may keep EUR/USD afloat as the report is anticipated to easing inflation.

US Economic Calendar

Even though the headline CPI is anticipated to hold steady at 2.9% in January, the core rate is expected to narrow to 3.1% from 3.2% per annum the month prior, and signs of slowing inflation may drag on the Greenback as it encourages the Fed to further unwind its restrictive policy.

However, a higher-than-expected CPI print may keep the FOMC on the sidelines as the US economy shows little signs of a recession, and evidence of persistent price growth may generate a bullish reaction in the US Dollar as it puts pressure on the Fed to keep interest rates on hold.

With that said, the rebound in EUR/USD may turn out to be temporary as the Fed follows a data- dependent approach in managing monetary policy, but the exchange rate may stage a larger rebound over the coming days as it bounces back ahead of the monthly low (1.0211).

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

EUR/USD extends the rebound from the weekly low (1.0286) to halt a three-day selloff, with a move above 1.0370 (38.2% Fibonacci extension) bringing the monthly high (1.0443) on the radar.
A break/close above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone may push EUR/USD towards the January high (1.0533), but lack of momentum to push above 1.0370 (38.2% Fibonacci extension) may keep the exchange rate within the opening range for February.
At the same time, failure to defend the monthly low (1.0211) may lead to a test of the January low (1.0178), with a close below 1.0200 (23.6% Fibonacci retracement) raising the scope for a move towards parity.

Additional Market Outlooks

USD/JPY Rebound Keeps RSI Above Oversold Zone Ahead of Fed Testimony

Canadian Dollar Forecast: USD/CAD Remains Susceptible to Trump Tariffs

GBP/USD Vulnerable amid Failure to Close Above 50-Day SMA

AUD/USD Recovery Stalls Ahead of January High

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.