EUR/USD Surges Past 1.17 as Dollar Crumbles on Fed Dovish Pivot, Trump Threats

EUR/USD Presses Higher as Dollar Retreats on CPI and Political Tension

The EUR/USD pair is pushing deeper into bullish territory, breaking above previously stubborn resistance at 1.16989 and climbing toward 1.17086 in Wednesday's session. The upward move follows an aggressive shift in Fed rate cut expectations after the U.S. July CPI report confirmed cooling price momentum, while the US Dollar Index (DXY) slid to 97.72, its lowest since April. The pair is now trading up 2.45% from its August 1 low of 1.1395, with bulls increasingly targeting the 1.1750–1.1800 zone.

The CPI data printed 2.7% YoY, slightly below consensus, while core CPI came in at 3.1%, marginally above estimates. Despite the upside core reading, markets interpreted the data as validation for policy easing, with the CME FedWatch tool assigning a 94.2% probability to a 25 bps rate cut at the September 17 FOMC meeting, up from 84.5% just days earlier. The EUR/USD has responded accordingly, surging as the dollar weakens, real yields slide, and political risk clouds Fed autonomy.

Technical Structure Favors Euro Bulls with Momentum Above 1.1655 Zone

Price action has solidified a bullish formation across multiple timeframes. The EUR/USD broke out of a descending trendline resistance near 1.1685, now firmly above the 50-EMA at 1.1627 and the 100-EMA at 1.1623. The pair is holding above a critical fair value gap (FVG) between 1.16556 and 1.16645, which now acts as a platform for any bullish pullbacks.

Short-term price action shows a clean sweep of prior liquidity below 1.1593, with momentum rotating higher as bulls reloaded into the dip. The RSI sits near 66, not yet overbought, giving room for continuation toward 1.1750, the next Fibonacci retracement zone, followed by 1.1830 and ultimately 1.1895 if follow-through persists.

Technically, the EUR/USD has formed both a bullish pennant and an inverse head-and-shoulders pattern, both pointing to upward continuation. The 200-day EMA is firmly below, further confirming medium-term bullish structure.

Dollar Pressure Builds as Political Heat Mounts on the Fed

Beyond inflation, political developments are layering on fresh pressure. Comments from White House spokeswoman Karoline Leavitt confirmed that President Donald Trump is actively considering legal action against Fed Chair Jerome Powell, citing mismanagement of headquarters renovations. While this may appear symbolic, the underlying message—intensifying executive criticism of central bank independence—has been absorbed by currency markets.

With Fed credibility in question and inflation data softening, markets are questioning the Fed’s ability to stay hawkish. This has translated into dollar weakness, pushing EUR/USD higher. The DXY has now lost more than 2% from its July highs, breaching the ascending support trendline and falling below both its 50-EMA (98.39) and 100-EMA (98.40).

Eurozone Macro Remains a Drag But Can't Derail the Rally

On the European side, economic data has been mixed. The ZEW Economic Sentiment Index fell sharply in August, with the Eurozone reading plunging to 25.1 (from 36.1 in July), while Germany’s equivalent dropped to 34.7 from 52.7. These deeply disappointing sentiment numbers reflect ongoing economic softness, particularly in manufacturing-heavy economies like Germany.

However, markets have so far ignored this weakness, focusing instead on the relative macro divergence: the U.S. is easing policy under inflation deceleration, while the European Central Bank is maintaining a wait-and-see approach. This relative positioning—combined with bullish technical setups—continues to support the euro.

Liquidity Pools and Price Magnet Zones Define Short-Term Targets

The next clear upside magnet is the 1.1750 liquidity zone, aligned with a prior price ceiling and Fibonacci extension. Above that, 1.1800–1.1830 is the upper range from earlier this year. Price rejection from 1.1700 has not materialized yet, and consolidation near that level strengthens the probability of a breakout.

Should EUR/USD retrace, the key zone remains the 1.16556–1.16645 FVG, which has not been filled since the August 12 breakout. Bulls will defend that zone as a launchpad. If it fails, the next support lies at 1.1600, followed by 1.1550—both areas tied to prior breakout bases and institutional flows.

Labor Market Data and Fed Officials Cement Dovish Outlook

Labor market data continues to soften, further validating dovish Fed bets. July’s nonfarm payrolls came in at just 73,000 jobs, while the unemployment rate rose to 4.2%. Revisions to May and June showed an average of only 35,000 new jobs/month, down significantly from the Q1 trend. Fed officials like Thomas Barkin, Christopher Waller, and Neel Kashkari have all signaled openness to easing, suggesting that the CPI reading may have given them the green light.

All eyes are now on German and Spanish inflation data, which could act as a trigger for extended euro moves. Should those numbers surprise to the upside, the ECB may have to shift tone—amplifying the bullish divergence against a Fed poised to cut.

Decision Point: EUR/USD is a BUY With Risk Toward 1.1600

The current structure across macro, political, and technical dimensions supports a BUY rating on EUR/USD. Momentum is aligned, the Fed has limited room to tighten, and downside appears well-contained unless 1.1655 breaks cleanly. Short-term pullbacks into 1.1664 offer high-risk-reward long entries, with upside targets of 1.1750, 1.1800, and 1.1833 in view.

Only a breakdown through 1.1600 would invalidate the bullish structure and return focus to broader consolidation. As it stands, EUR/USD remains one of the clearest beneficiaries of the current rate policy shift—well-positioned to test multi-month highs in the sessions ahead.

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