EUR/USD Price Analysis: Pair Struggles Near 1.1630 as Fed Turmoil, Trade Tensions, and Eurozone Politics Collide
EUR/USD Reacts to Fed Governor Removal and US Political Uncertainty
The EUR/USD pair trades around 1.1630, retreating from intraday highs of 1.1660 as political shocks in Washington dominate sentiment. President Trump’s attempt to remove Fed Governor Lisa Cook on mortgage fraud allegations unsettled markets, sparking fears that the White House is undermining central bank independence. The Federal Reserve dismissed the move as unlawful, yet the announcement triggered a sharp market reaction. The U.S. dollar initially dipped, but then recovered as traders speculated Trump could replace Cook with a policy dove, boosting chances of aggressive September easing. CME FedWatch now prices in an 84% probability of a rate cut in September, sharply higher than last month’s 62%, reinforcing pressure on the greenback.
Euro Under Strain from French Political Risk and Budget Impasse
While the dollar wrestles with political interference risk, the euro has failed to capitalize. The French Prime Minister faces a September 8 confidence vote after opposition parties rejected budget cut proposals, raising fears of instability in the Eurozone’s second-largest economy. Investors are concerned a budget showdown in Paris could ripple across Europe at a time when growth remains weak. German IFO business climate data improved modestly to 89 from 88.6, its highest since May 2024, but still signaled fragile recovery momentum. With the European Central Bank expected to hold rates steady, while the Fed faces political pressure to cut, policy divergence could tilt sentiment in EUR/USD’s favor if U.S. yields continue sliding.
Trade War Threats and Digital Taxes Weigh on EUR/USD
Adding further uncertainty, Trump threatened fresh digital service taxes directly targeting the European Union. Such measures risk igniting another transatlantic trade dispute, a scenario that typically undermines the euro as export-dependent economies like Germany face retaliatory pressure. The euro’s failure to push beyond the 1.17 handle reflects these compounding risks. Traders see potential upside capped unless trade rhetoric cools.
Macro Data: Durable Goods, Core PCE, and GDP in Focus
Market participants await critical U.S. data this week. July Durable Goods Orders are expected at -4%, moderating from June’s steep -9.3% decline. A softer print would reinforce dovish Fed expectations and weigh on the dollar. The Core PCE Index and Q2 GDP revision are decisive catalysts—subdued inflation would validate easing bets, while resilient data could stall EUR/USD upside momentum.
Technical Outlook: EUR/USD at a Critical Juncture
On the technical front, EUR/USD trades near 1.1624, holding just above a rising trendline from early August. The 50-EMA at 1.1653 and 100-EMA at 1.1647 form a resistance cluster that bulls must reclaim to retest the 1.1700–1.1740 zone. Failure to break higher risks a drop toward 1.1581, with stronger downside targets at 1.1528 and 1.1391 if bearish momentum accelerates. RSI sits at 43, showing mild downside pressure, while MACD remains flat, reflecting indecision. A decisive close above 1.1684 would open the path for bulls, while failure exposes the pair to further liquidation toward mid-August lows.
Market Sentiment and Positioning
Speculative flows highlight caution. Profit-taking in the euro followed Friday’s rally above 1.1700 after Powell’s dovish Jackson Hole remarks. The pullback erased nearly 1% of gains, pushing EUR/USD back to 1.1610. With U.S. Dollar Index consolidating around 98.40, the euro remains range-bound, its fate hinging on whether U.S. data confirms or challenges aggressive Fed cut pricing. On-chain equivalents for positioning show euro bulls defending the 1.1600 level, with liquidity clustered at 1.1700 for potential upside squeezes.
