EUR/USD Price Forecast - Eur Holds Above 1.17 as Tariff War Fears Hammer Dollar and Put 1.18 Back in Play

EUR/USD – Tariffs, Davos Risk And A Weakening Dollar

Current EUR/USD posture: short-term euro dominance above 1.17

EUR/USD has switched from “parity candidate” to relative safe leg as US-driven political risk gets repriced. The pair has added more than 1% in two sessions and is trading around 1.1710–1.1720 after a clean upside break, with buyers reacting to aggressive tariff rhetoric and the Greenland confrontation rather than to any surge in Eurozone growth. Capital is moving out of the epicenter of the shock – the US Dollar – and into alternatives, and EUR is one of the main beneficiaries alongside XAU/USD. The move is not random noise: it follows a technical breakout and sits on top of a clear macro narrative built around tariffs, Davos headlines and rate-cut expectations.

US Dollar side of EUR/USD – DXY pinned near 98.5–98.6 with capped upside

The Dollar index is hovering around 98.58–98.60, just above a key Fibonacci cluster at 98.547. Price has defended that band several times, printing spinning tops and doji candles, a sign that selling pressure is being absorbed but not fully reversed. Support is concentrated in the 98.43–98.50 region, while 98.729 is the first serious resistance checkpoint, followed by 98.876 and 99.022 as higher targets if a rebound takes hold. Momentum is neutral, with RSI near 50 and short and long moving averages converging. The fundamental overlay is what caps the upside: two rate cuts are now priced for 2026 with the first pushed into June, housing indicators are softening and the Dollar is on the front line of the tariff conflict. Without a sharp positive surprise from US data or a visible de-escalation around Greenland and trade, any DXY recovery above 99.00 is likely to meet supply.

Broad structure in EUR/USD – 1.1509–1.1819 range still dominates

Despite the violent intraday swings, EUR/USD is still trading within a wide sideways band with resistance near 1.1819–1.1820 and support around 1.1509–1.1510. The latest leg has simply lifted the pair from the lower half of that corridor back toward the ceiling. This matters because repeated tests of both edges have reinforced the range as the primary structure. The current rally shows that when stress hits, the market is more comfortable paying 1.17–1.18 for the pair than 1.15–1.16, which is a subtle momentum shift in favor of the euro. Until 1.1819 is broken on a sustained basis, the price action is best viewed as a bullishly-biased range, not yet a confirmed long-term uptrend.

Breakout dynamics in EUR/USD – channel break and upside levels

The pair has just exited a descending channel to the upside, signaling a potential trend inflection rather than a simple bounce. The breakout has carried spot to roughly 1.1717, sitting just below the 0.236 Fibonacci retracement at 1.17224 drawn from the latest downswing. That fib band is the first technical test for bulls. Above it, the resistance stack becomes dense. The 1.1760 zone has already acted as a cap in the prior impulse, and 1.1766 and 1.17688 reinforce that same region as a short-term supply area. The upper boundary of the broader range at 1.1819–1.1820 is the next major target. If that area is taken out convincingly, the next extension levels stand around 1.18488 and 1.18965. With momentum stretched – RSI above 70 on key intraday charts – the risk is that the market pauses or corrects before pressing through all of these levels in one move.

Support map in EUR/USD – from 1.1710 down to the 1.1509 floor

On the downside, the market has drawn a clear ladder of supports. The first line is 1.1710, which has acted as a pivot in the current consolidation; losing that level on a closing basis would be the first warning that the breakout is tiring. Below that, 1.16943, the 0.382 Fibonacci retracement, is the next reference. A controlled pullback into 1.1694–1.1672 that is aggressively bought would still fit a constructive narrative. If selling deepens, the 1.1656 and 1.1633 region becomes critical as a medium-term demand area that has previously attracted buyers. Further down, 1.1616 and especially 1.1583–1.15834, which aligns with a 200-period moving average cluster, are the key medium-term lines in the sand. A decisive break below 1.1583 would open risk of a return toward the 1.1509 floor and would materially weaken the bullish case for the coming weeks.

Political driver for EUR/USD – Greenland, tariffs and Davos in focus

The main impulse behind the recent EUR/USD surge is political, not purely economic. The US has threatened initial 10% tariffs from 1 February on imports from roughly eight European countries if support for acquiring Greenland does not materialize, with a pathway to raise those tariffs up to 25%. On top of that, the specific threat of tariffs of almost 200% on French wine if France does not join a US-led “Board of Peace” has been read as overt economic coercion. These statements have increased perceived US political risk and pushed investors to reduce Dollar exposure. Davos is now the focal point, with markets watching Trump’s speech closely for any escalation or softening of the rhetoric around Greenland and trade. Every headline that reinforces the confrontation narrative tends to weaken USD and support EUR/USD, while any hint of compromise could trigger a corrective pullback in the pair.

Macro calendar for EUR/USD – Fed cuts priced for June, ECB steady at 2.00%

The macro calendar reinforces rather than contradicts the recent price action. On the US side, the latest ADP weekly employment print of roughly 8,000 additions, down from about 11,300 previously, is soft but not catastrophic. Markets now price roughly two 25-basis-point rate cuts in 2026, with the first move shifted to June instead of arriving earlier in the year. Housing and investment indicators underline the drag from tight financial conditions: Pending Home Sales are expected around –0.3% month-on-month after an unusually strong +3.3% prior reading, and Construction Spending is forecast near 0.1% after 0.2%. These numbers argue against a strong Dollar when political risk is elevated. On the European side, the European Central Bank’s first 2026 meeting on 3 February is projected to leave the deposit rate at 2.00%, with market probability in the mid-90% range that this setting holds across several meetings. A central bank perceived as predictable and neutral on rates is an asset when the other side of the pair is in political turmoil.

Euro’s role in EUR/USD – temporary “cleaner” leg versus the Dollar

In this configuration, the euro is acting as the cleaner side of the trade, even if it is not a classic safe haven. The shock originates in US policy, so risk-averse flows are pulling away from USD rather than from EUR. Investors looking for alternatives are rotating toward assets and currencies that are not at the center of the tariff dispute but still sit inside relatively solid institutional frameworks. Eurozone bonds benefit from this and so does the currency. The ECB’s steady stance at 2.00% avoids adding volatility on the European side, while the US faces debates about tariffs, Fed independence and appointments. As long as that asymmetry persists, EUR/USD will tend to find support on dips rather than revert immediately back to the lower part of the range.

Intraday map in EUR/USD – trading the 1.1710–1.1760 band

For intraday positioning, the market has created a tight battlefield. On the upside, the 1.1760 handle remains the initial reference level after capping the previous extension. The 1.1766–1.17688 pocket just above will attract both profit-taking and fresh short attempts from traders who do not want to chase a move with RSI already stretched. A break and hold above that band puts 1.1808–1.18089 and then the 1.1819–1.1820 ceiling back into play. On the downside, the 1.1710 and 1.16943 cluster is where dip buyers have most incentive to step in as long as Davos and tariff headlines do not show dramatic de-escalation. Deeper pullbacks into 1.1672 and 1.1633 would still be consistent with a bullish narrative if price finds firm demand there. Only a slide through 1.1583 with momentum behind it would shift the intraday bias decisively back to neutral or negative.

Higher-timeframe view on EUR/USD – bullish tilt inside a sideways structure

From a higher-timeframe perspective, EUR/USD is still boxed inside the 1.1509–1.1819 range, but with a clear upward tilt. The recent rally has taken the pair from the lower half of that band back toward the top, and the way it got there – via a channel breakout, improving RSI, a MACD histogram edging above zero and price holding above both 50- and 200-period moving averages – indicates that the underlying demand for euros has improved. The next strategic question is whether the market has the conviction and macro support to close decisively above 1.1819 and build a new trend leg toward the mid-1.18s and high-1.18s. As long as the pair fails at that ceiling and holds 1.1509–1.1583 on the downside, the correct description remains “range with bullish bias” rather than fully trending market.

Verdict on EUR/USD – Buy bias, bullish while above roughly 1.1650

Combining the technical and macro layers leads to a clear stance. The Dollar index is pinned near 98.5–98.6 with political headwinds, Fed cuts are priced for mid-2026, US domestic data are mixed, the ECB is steady at 2.00%, tariffs and Greenland headlines are undermining USD, and EUR/USD has just broken a descending channel to trade around 1.1710–1.1720 with a clear support ladder underneath. As long as the pair holds above roughly 1.1650, the configuration justifies a Buy and bullish bias, with upside focus initially on the 1.1760–1.1800 zone and, on a break of 1.1819, on 1.1840–1.1900. A sustained move below 1.1583 would downgrade the view to Hold and re-open risk toward the 1.1509 floor, but current price behavior and the surrounding macro story do not support a Sell classification here.

That's TradingNEWS