The EUR/USD pair increased to around 1.1655 in the European session on Monday but remained below the 100-day EMA. Initial resistance is noted at 1.1665, with support at 1.1640. A weaker US Dollar contributes to this movement as concerns grow over US Fed independence. Traders anticipate the US CPI inflation report, which could impact the currency pair.
Fed Chair Jerome Powell faces potential criminal charges related to his Senate testimony, which impacts the USD and aids EUR/USD momentum. Geopolitical tensions in Iran could increase demand for safe-haven currencies, affecting the USD. Technically, the 100-day EMA at 1.1665 indicates a slight medium-term positive bias, with price remaining just below this level.
Euro Impact Factors
The Euro, used by 20 EU countries, is the second most traded currency globally and is affected by data points such as GDP, inflation, and trade balance. The ECB influences Euro value through monetary policy, with inflation data particularly impactful due to its effect on interest rate decisions. The Euro’s trade balance is also a critical indicator, with a favourable balance potentially boosting its value.
The EUR/USD is currently testing significant resistance, hovering just below the 100-day Exponential Moving Average at 1.1665. We see this as a critical decision point for the pair in the coming days. Options traders should note the low Relative Strength Index of 41, which suggests that upward momentum is still weak despite the recent price drift.
This dollar softness follows last week’s disappointing Non-Farm Payrolls report, which showed the US economy added only 95,000 jobs in December 2025, well below expectations. That weak data, combined with ongoing concerns about the Federal Reserve’s leadership, is weighing on the dollar. This makes a short-term push higher for the EUR/USD plausible if new data supports this trend.
European Central Bank Influence
Conversely, the Euro is finding support from a relatively hawkish European Central Bank. The latest Harmonized Index of Consumer Prices for the Eurozone in December 2025 came in at a stubborn 3.1%, keeping pressure on the ECB to hold interest rates firm. This policy divergence between a potentially wavering Fed and a resolute ECB is the primary driver we are watching.
Given the strong technical resistance, buying naked call options here is risky. We believe a bull call spread, buying a call at a lower strike price and selling one at a higher strike like 1.1730, could be a more prudent strategy. This approach defines the risk and would profit from a modest upward move through the current barrier.
All eyes must be on this week’s US Consumer Price Index report, which is the next major catalyst. A higher-than-expected inflation reading could instantly reverse the dollar’s weakness and send the EUR/USD back down toward the 1.1640 support level. This is the main risk to any bullish position established now.
Volatility is currently contained, but a decisive close above the 100-day EMA could trigger a sharp expansion. We saw similar behavior back in late 2024 when the pair broke through key technical levels amid shifting central bank expectations. Getting positioned with defined-risk strategies before such a potential move could prove advantageous.
