EUR/USD Price Forecast: Euro Stalls Below 1.20 As Warsh, PPI Shock And War Risk Hit FX

EUR/USD Price: Hawkish PPI Shock, Warsh Nomination And War-Risk Volatility

Macro shock: US PPI and Fed repricing hit EUR/USD

The PPI print in the US flipped the script for EUR/USD in a single session. Headline PPI jumped 0.5% m/m and core PPI 0.7% m/m, versus consensus at 0.2% for both. That forced markets to reprice the second Fed cut of 2026 out toward October, pushed US yields higher, and broke the narrative of a steadily weakening dollar.
Into that release, EUR/USD had already broken higher, clearing the 1.1866 cap that had frustrated buyers for weeks and signalling a classic trend-continuation setup toward 1.20–1.23. Once PPI hit, that breakout was sold hard. The pair gave back the move almost immediately, turning what looked like the start of a sustained up-leg into a spike and failure. That price action tells you positioning was crowded on the EUR side and over-optimistic on near-term US disinflation.

Warsh nomination: Fed chair choice reshapes EUR versus USD

President Trump’s decision to nominate Kevin Warsh as the next Fed chair adds another layer under EUR/USD. Warsh carries a reputation as a hawk from his prior Fed tenure, yet is now widely expected to support lower rates relative to the deeply restrictive stance seen earlier in the cycle.
The nomination had two direct effects relevant for EUR/USD. First, it helped burst the speculative blow-off in precious metals, confirming that the Fed is unlikely to run an ultra-dovish rescue of the gold and silver bubble that had pushed spot gold to roughly $5,600 and silver to about $120 before the crash. Second, it stopped the dollar’s slide from a four-year low: the US Dollar Index printed a large bullish pin bar off fresh multi-year lows, even though the broader trend remains down with DXY still below its 13-week and 26-week levels.
For EUR/USD that leaves an asymmetric setup. A Warsh-led Fed is unlikely to underwrite a policy shock so dovish that it collapses the USD, but neither is it positioned to deliver a Volcker-style squeeze. That argues for a choppy but still dollar-negative medium-term background, with sharp counter-trend squeezes like the one just seen after PPI.

War premium: Iran, WTI crude and the EUR/USD risk channel

At the same time, the geopolitical tape is loading a war premium into commodities and risk assets that indirectly feeds into EUR/USD. Prediction markets now see a US strike on Iran as likely in March, and the US is still building up military assets near Iran. The result is visible in WTI crude, which has pushed to a fresh 4-month high, trading above $66 and testing resistance around that level.
Higher crude with war risk does two things to EUR/USD. It raises global risk aversion, which normally supports the USD as the primary reserve asset, and it tightens the external position of energy-dependent regions like the euro area. That combination tends to cap EUR/USD rallies in the short term even when the structural story still favours a weaker dollar over a multi-quarter horizon.

US Dollar Index structure: conflicted backdrop for EUR/USD

The US Dollar Index weekly chart is now sending mixed signals to EUR/USD traders. On one hand, DXY remains in a long-term downtrend, trading below its levels from 13 and 26 weeks ago and having just notched a new 4-year low before the latest bounce. On the other hand, last week’s candle was a strong bullish pin bar rejecting those lows, exactly the kind of reversal pattern that can fuel a multi-week squeeze.
For EUR/USD the message is straightforward: the macro backdrop still favours a weaker USD over 2026 because US inflation has cooled enough to justify cuts later in the year, but the timing and pace of those cuts are now more uncertain after the 0.5%/0.7% PPI surprise. That uncertainty supports two-way volatility rather than a clean one-direction trend.

Spot behaviour: from clean EUR/USD breakout to failed thrust

On the daily chart, EUR/USD delivered exactly what trend-followers wanted at first: a decisive break above 1.1866, a level that had capped price action for months. That breakout was strong enough that some forecasts explicitly shifted to a bullish call for February, expecting EUR/USD to rise and maintain momentum as long as the pair held above that line.
Instead, after the PPI release and the Warsh nomination, the pair was “absolutely crushed” back below the breakout zone. Momentum flipped from strong upside to heavy intraday selling, and the move now has all the characteristics of a failed break rather than the start of a sustainable run. Below spot, the 1.16 region is now a realistic downside magnet if sellers stay in control, while on the topside, any renewed squeeze will first face 1.1866 as reclaimed resistance, then 1.20, and finally the prior extension target near 1.23.

Cross-asset message: Silver crash, Gold reset and what XAU/USD says about the dollar leg

The crash in precious metals is not just a side show; it informs how you read EUR/USD. Silver exploded to roughly $122 before collapsing below $90 in one session and threatening a slide toward $80. Gold hit about $5,600 per ounce and then dropped violently, with prints near $4,770–4,900 and intraday lows around $4,679.50, an 8–15% drawdown depending on the reference point.
For XAU/USD, several detailed structures still argue that the broader bullish trend remains intact as long as gold holds above roughly $4,000–4,400, with key support zones around $4,650 (50-day moving average), the high $4,800s–low $4,900s, and deeper demand closer to $4,600 and $4,500. That combination—sharp correction but intact long-term uptrend—implies the dollar leg of the move is not a full regime change but a violent reset in crowded trades.
For EUR/USD, the signal is similar: the market has just punished late-longs in high-beta “anti-dollar” trades (Silver, speculative gold, crypto), while leaving structurally supported assets (reserve-driven XAU/USD, major FX pairs) in far better shape. That argues against extrapolating the latest USD strength into a new multi-year bull market.

Crypto unwind and risk sentiment: BTC/USD slide as a warning signal

Crypto adds another layer to the risk profile. BTC/USD has broken below a long-term support zone just above $81,000, trading down toward $77,000 and setting a new 9-month low after previously topping out near $126,100. That is a drawdown of roughly 38% from the peak. Several analysts now describe the phase as “capitulation,” and some are openly labelling it a bear market despite ongoing debate.
From an EUR/USD perspective, the key point is that speculative risk assets are being repriced down simultaneously: Silver bubble burst, gold corrected, BTC lost long-term support, while US equities (S&P 500 above 7,000) are grinding without strong upside momentum. In that environment, the dollar tends to benefit from defensive flows, even when its long-term fundamentals remain soft. That is exactly the configuration now constraining EUR/USD upside.

Policy divergence and inflation: EUR versus USD in 2026

On the USD side, the policy story is now dominated by the PPI shock and the Warsh nomination. With monthly PPI running at 0.5% headline and 0.7% core, the Fed has a clear argument to delay cuts without sounding erratic. Markets have responded by pushing the second 2026 cut back to Q4, which supports yields and the dollar in the near term.
On the EUR side, the backdrop remains one of weak growth and lower trend inflation than the US, with the ECB already closer to a neutral or mildly accommodative stance. That means the euro does not benefit from a major hawkish repricing to offset the US surprise; the adjustment has primarily happened through the USD leg. As a result, EUR/USD is being pulled between a structurally overvalued dollar and a short-term shift in US rate expectations that favours USD strength.

Volatility, positioning and what it means for EUR/USD traders

Directional volatility across majors has cooled from the extremes seen in Silver and gold but remains meaningful. Over the past week only about 11% of major FX pairs moved more than 1%, yet EUR/USD itself saw a large intraday range around the breakout and failure sequence. At the same time, the Swiss franc and New Zealand dollar traded as the strongest majors, while the US dollar ranked among the weakest on a multi-week basis despite the recent bounce.
For EUR/USD, that mix—US dollar still weak on a rolling multi-week view but showing a strong weekly pin bar off lows—favours tactical trading over blind trend-following. Long EUR/USD into strength above 1.1866 without confirmation proved costly; the next leg will require much stricter trigger points and a clear read on how the market digests upcoming US labour and inflation data.

Key levels and trading map for EUR/USD

The critical price markers are now clear:
– Support: first, the 1.16 zone, which is the logical magnet if the current USD squeeze extends; below that, the broader structural base from earlier in the cycle sits lower, but 1.16 is the immediate line in focus.
– Pivot: the prior breakout area around 1.1866 has flipped from support to resistance; the market’s ability or failure to reclaim that band will define the next leg.
– Trigger: a decisive daily close above 1.2039 would re-open the path toward 1.20 and then 1.23, confirming that the recent sell-off was a corrective failure rather than a full regime shift.
While the monthly forecast from some desks now explicitly expects EUR/USD to rise in February, the market will not pay you for direction alone; it will pay you for timing entries around these levels with the macro calendar in mind.

EUR/USD stance: cautious bullish bias, but only above 1.2039

Putting all the pieces together—PPI shock, Warsh’s nomination, Iran war risk, WTI at a 4-month high, the metals crash, the BTC slide, and the conflicted US Dollar Index structure—the neutral conclusion would be to sit on the fence. That is not useful.
On the data set you provided, the cleaner call is this:
– Below 1.1866, EUR/USD is a hold, not a buy. Choppy conditions, elevated event risk, and a recent failed breakout make fresh longs unattractive.
– Between 1.1866 and 1.2039, EUR/USD is a tactical trading vehicle, not a core position: fade extremes, respect intraday levels, keep size light.
– Above a confirmed daily close at 1.2039, EUR/USD flips back to a buy, targeting 1.20 first and then the 1.23 region, with the broader structural dollar downtrend re-asserting itself once the current macro shock is fully priced.
Directionally, the medium-term bias remains bullish EUR/USD, but only once price proves it can re-establish control above that 1.2039 trigger after digesting the inflation surprise, the new Fed chair, and the current wave of war-driven risk aversion.

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