The EUR/USD pair rose to approach 1.1655 during the early European session on Monday. The US Dollar (USD) fell against the Euro (EUR) amid renewed concerns about the independence of the US Federal Reserve. Traders await the US CPI inflation report on Tuesday.
Federal Reserve Chairman Jerome Powell He said in a statement The US Department of Justice threatened to bring criminal charges against him in connection with his testimony before the Senate last June, during which he discussed the estimated $2.5 billion renewal process. Powell described this step as unprecedented and a direct challenge to the independence of the central bank. This, in turn, weighs on the dollar and creates tailwinds for the major pair in the near term.
On the other hand, rising geopolitical tensions after reports of hundreds of deaths during protests in Iran could boost a safe haven currency like the US dollar. US President Donald Trump threatened repercussions if Iranian authorities targeted civilians, while Tehran warned the United States and Israel against any interference.
Technical analysis:
On the daily chart, the 100-day moving average is rising at 1.1665, confirming a slight improvement in the medium-term bias. The price stabilizes just below this scale, with the average maximum attempts to move higher. The price is hovering near the lower Bollinger band at 1.1650, indicating a downward extension as volatility shows a modest expansion. This range acts as initial support, while a daily close above the average would stabilize the tone.
The RSI held at 41, recovering from recent lows but still below the 50 mid-line, keeping momentum weak. On a strength basis, resistance lines up at the middle Bollinger band at 1.1728, with the upper band set at 1.1817 to cover any extended recovery. A sustained move above these thresholds could shift the bias back towards a broader bullish phase.
(Technical analysis of this story was written with the help of an artificial intelligence tool)
Frequently asked questions about the euro
The euro is the official currency of the twenty European Union countries that belong to the eurozone. It is the second most traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily trading volume of more than $2.2 trillion per day. The EUR/USD is the most widely traded currency pair in the world, accounting for a 30% discount on all transactions, followed by EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the euro area. The European Central Bank sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher interest rates – usually benefit the euro and vice versa. The ECB’s Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by the heads of the eurozone’s national banks and the six permanent members, including the President of the European Central Bank, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is one of the important economic indicators for the euro. If inflation rises beyond expected, especially if it is above the ECB’s 2% target, this forces the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to their counterparts usually benefit the euro, because they make the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can affect the euro. Indicators such as GDP, manufacturing and services PMIs, employment, and consumer confidence surveys can all influence the direction of the single currency. A strong economy is good for the euro. Not only does it attract more foreign investment, it may encourage the European Central Bank to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro will likely fall. Economic data for the four largest Eurozone economies (Germany, France, Italy and Spain) are of particular interest, as they represent 75% of the Eurozone economy.
Another important data for the Euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a certain period. If a country produces highly desirable exports, its currency will gain value from the additional demand generated by foreign buyers seeking to purchase these goods. Therefore, a positive net trade balance strengthens the currency and vice versa for a negative balance.
