EUR/USD Price Forecast - Eur Holds 1.1860–1.19 Zone as Dollar Cracks and Fed, JPY Intervention Loom

EUR/USD – Dollar Breakdown Pushes Pair Toward 1.19–1.20

Dollar at 97.00 and JPY Intervention Fear as Core Driver of EUR/USD

EUR/USD is trading around 1.1860–1.1900 after ripping to a four-month high near 1.1875 and spiking toward 1.1919–1.1920, its highest zone in almost four years. The move is powered by forced Dollar liquidation, not by a sudden Euro boom. The Dollar Index is sitting around 97.00, a four-month low, after the Fed checked USD/JPY rates on Friday – the classic pre-intervention signal. Traders are dumping USD carry exposure across the board to avoid being caught on the wrong side of a joint US–Japan action to support JPY.
In that environment, EUR/USD becomes one of the easiest USD shorts to express: liquidity is deep, and the Euro is not directly tied to the JPY story. That is why the pair climbed roughly 0.26–0.36% on the day even though Eurozone data did not justify a standalone Euro rally. Technically, the squeeze drove price straight into the 1.1860–1.1917 resistance band, with intraday pivots showing R1 near 1.1866 and a key horizontal cap at 1.1917–1.1919. A sustained daily close above that zone would unlock a direct run at the 1.2000 psychological figure.

Euro Macro: Stagnant IFO at 87.6 and Mixed PMIs Limit Fundamental Upside for EUR

The Euro side of EUR/USD is not delivering a macro breakout. The German IFO Business Climate stayed stuck at 87.6 in January, exactly matching December and missing the expected uptick to 88.1. The Current Assessment index barely nudged higher from 85.6 to 85.7, while Expectations slipped from 89.7 to 89.5. That combination describes an economy treading water, not one justifying a structural re-rating of EUR.
Broader Eurozone indicators send the same message. Services PMI for the bloc dipped to 51.9, still above 50 but clearly losing momentum. Germany’s services sector beat expectations, and manufacturing improved modestly, yet factory activity remains in contraction. December German industrial production surprised on the downside with a -0.7% drop, underscoring the lack of hard-data support for a hawkish ECB stance.
Bottom line: the current push in EUR/USD above 1.1850 is not being driven by Euro strength. It is a Dollar story. If US policy communication stabilizes the USD, the macro divergence – soft Eurozone versus still-resilient US – can reassert itself very quickly.

US Macro Setup: Durables, 210K Jobs and a Fed Paused at 3.50%–3.75%

On the US side, near-term flow is dominated by the Fed and incoming data. November Durable Goods Orders are projected to rebound by about 0.5% after October’s -2.2% drop, with ex-transport orders expected at +0.3% after +0.2%. A solid print would reinforce the view that US capex remains intact and could slow the Dollar selloff.
The main event, however, is the FOMC decision. Markets expect rates to be held in the 3.50%–3.75% range after three cuts totaling 75 bps in late 2025. The level is fully priced; what matters is Powell’s tone on inflation and labor. With December payrolls around 210K, the US labor market is still stronger than most peers. If Powell leans slightly hawkish or clearly pushes back against aggressive 2026 easing expectations, the Dollar can quickly bounce from 97.00 and squeeze over-short positioning.
Complicating the picture is a visible political and institutional risk premium in USD. Legal pressure on the Fed, Trump’s threats of 100% tariffs on Canada, and renewed shutdown chatter all undermine confidence in US policy consistency. That contributes to the reluctance to hold large USD longs, feeding the current EUR/USD upside.

Cross-Asset Heatmap: EUR Gains Are Real but Still Primarily a USD Washout

Currency performance tables show EUR as the strongest major versus USD on the day, with Euro up about 0.19% against the Dollar. The Dollar is also weaker by roughly 0.09% versus GBP and around 0.26% versus AUD, while losing over 1.00% versus JPY. The sharp USD loss against JPY is the anchor of this move; other pairs, including EUR/USD, are responding to that stress and to the forced reduction in USD risk.
For EUR/USD that means today’s strength is a by-product of broad Dollar capitulation, not the market suddenly re-rating Eurozone assets higher. If the yen story fades and intervention risk is absorbed, the same heatmap can flip back, and the pair can give up part of its gains without any change in Euro fundamentals.

Intraday Structure on EUR/USD: Overbought Momentum and a Gap at 1.1825

On lower timeframes, EUR/USD is visibly stretched. The 4-hour RSI is in overbought territory, signaling that momentum is hot rather than fresh. A bearish pin bar formed after the push into the 1.1900–1.1920 zone, confirming active offers around that supply region despite Dollar weakness.
A notable feature is the bullish gap around 1.1825 on the 4-hour chart. Gaps of this kind are frequently filled, so a pullback from 1.1860–1.1920 toward 1.1825 is a realistic short-term scenario. Slightly below, the 1.1800 area – former resistance defined by late-December highs – has turned into a key demand pocket. That 1.1800–1.1825 band is now the first serious liquidity zone where dip buyers can step back in without breaking the trend.
In practical terms, the short-term bias on EUR/USD remains bullish, but the pair has enough extension that a 50–100 pip correction toward 1.1825–1.1800 would be normal, not a trend change.

Daily Trend: 20-Day EMA at 1.1713, RSI Near 70 and the 1.1919 Break Level

On the daily chart, EUR/USD trades around 1.1860–1.1870, significantly above the 20-day Exponential Moving Average at roughly 1.1713. The 20-day EMA is sloping higher, confirming that the short-term trend is positive and that any drop back toward 1.1710–1.1730 should, on first touch, be treated as a pullback inside an uptrend.
The 14-day RSI stands near 69.5, brushing against the classic 70 overbought threshold. That signals a one-sided market but does not yet guarantee a reversal. Price is pressing into the four-year high zone at 1.1919–1.1920. A clean daily close above 1.1919 would convert that cap into a new floor and open a path toward the 1.2000 psychological barrier and then the 1.2030–1.2050 extension region.
As long as EUR/USD holds above the 20-day EMA after any correction, the bulls keep control on the daily timeframe. Only a sustained break below 1.1713–1.1730 would signal that the current leg is losing structural strength.

Weekly View: Uptrend from 0.9534 Intact Above 1.1443 55-Week EMA

Stepping back, the medium-term picture still favors EUR/USD upside. The pair is advancing in a broader move that began at the 0.9534 low in 2022. The 55-week EMA, now near 1.1443, has been the key dividing line between bull and bear regimes. While price holds well above that moving average, the long advance from 0.9534 remains the dominant structure.
A decisive weekly close above the 1.2000 psychological level would significantly strengthen the bullish narrative. It would suggest that the move from 0.9534 is not just a corrective three-wave recovery but part of a larger structural shift in favor of EUR against USD.
Conversely, only a sustained drop back below the 55-week EMA around 1.1443 would argue that the 0.9534–1.20 leg has completed and that the longer-term Dollar bull trend is resuming. With spot near 1.1860 and the Dollar under pressure from intervention risk, that bearish weekly scenario is not the base case.

Event Risk Ladder: Fed, Eurozone GDP, German HICP and Their Impact on EUR/USD

The immediate risk calendar is dense. First, November US Durable Goods at roughly +0.5% headline and +0.3% ex-transport can either reinforce the “resilient US” story or, if they miss, add fuel to the Dollar selloff. In combination with the prior 210K payrolls print, firm durables would give the Fed justification to resist further easing expectations.
Second, the FOMC decision on Wednesday will almost certainly leave rates at 3.50%–3.75%. The market already prices the hold; the reaction hinges on Powell’s guidance. If he stresses inflation risks, downplays imminent cuts, or highlights solid labor data, the Dollar can bounce sharply, pulling EUR/USD back toward 1.1800–1.1730. If he leans dovish or tolerates market pricing for substantial 2026 easing, EUR/USD can break and hold above 1.1919 and start probing 1.2000.
On the Euro side, preliminary Q4 Eurozone GDP and Germany’s January HICP will be crucial. Soft GDP and tame HICP would cement the view that the ECB will stay sidelined and that EUR lacks its own rate-differential engine, leaving the pair fully dependent on Dollar moves. Any upside surprise in growth or inflation adds some fundamental backbone to the Euro, but it will still be secondary to the Fed in the very short term.

Positioning, Sentiment and Strategy: EUR/USD as Bullish Bias, Buy-the-Dip Rather Than Chase

Positioning and sentiment confirm that EUR/USD is being driven by USD stress rather than blind Euro euphoria. The Dollar is being sold broadly on intervention fears, political noise and a temporarily weakened Fed communication stance. Risk sentiment is cautious because of tariffs and geopolitics, which normally would benefit the Dollar as a safe haven – but the JPY intervention overhang is flipping that usual script for now.
For trading and strategic positioning, the current structure argues for a bullish bias on EUR/USD, but with disciplined execution. Chasing fresh longs above 1.1900 into multi-year resistance when the 4-hour RSI is overbought and a gap sits at 1.1825 is poor asymmetry. A cleaner approach is to treat 1.1825–1.1800 as a first buy-the-dip zone and 1.1730–1.1713 (gap fill and 20-day EMA) as the deeper support band where medium-term bulls can reload if the Fed triggers a shakeout.
From a directional standpoint, the data set on the table – DXY near 97.00, EUR/USD well above key moving averages, intervention risk weighing on USD/JPY, and Euro data that is weak but not collapsing – supports a buy-on-dips stance in EUR/USD, with the broader target area centered on 1.2000 as long as the pair trades above 1.1710–1.1730.

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