Euro Faces Pivotal Test as EUR/USD Rally Stalls Below 1.1900

Key Moments

Countervailing Drivers Shape the Dollar Landscape

The U.S. dollar is being pulled in different directions, and this push-pull is now central to FX markets. Price swings have been large, but traders remain cautious. They are balancing policy signals against macro strength.

On the policy side, comments earlier this month from U.S. Treasury Secretary Scott Bessent suggested officials see weakness in some Asian currencies as too extreme. That view was supported by reports that the New York Fed conducted rate checks in USD/JPY. Many traders see such checks as a sign that intervention may be possible.

Taken together, these developments have reinforced the idea that U.S. policymakers may accept a weaker dollar. As a result, USD selling has extended beyond Asia and into the broader G10 complex.

At the same time, renewed tariff threats from the Trump administration have added uncertainty. Recent warnings aimed at Canada and South Korea followed earlier tariff risks toward several European countries. This pattern has been one of rapid escalation and quick reversals. Even when the threats do not become policy, the uncertainty still pressures the dollar. In other words, political risk is acting as a headwind.

However, this political story runs into a strong macro counterweight. U.S. economic momentum remains firm. Therefore, markets have reduced the expected size of 2026 rate cuts as data continue to beat forecasts.

Today's range expected 1.1859 x 1.1925, next POC below 1.1744, in between daily S2 1.1802 and S3 1.1769. EUR yesterday still strong, price now around DP 1.1874 and next bundle of levels below weekly R3 1.1845, daily S1 1.1841 and YL 1.1835. pic.twitter.com/cW2RNX4kwc

— Trading Range EURUSD (@TraderJJS) January 27, 2026

Macro Data Underscore Underlying U.S. Strength

The Atlanta Fed’s GDPNow model currently signals growth well above potential. At the same time, Citi’s U.S. economic surprise index remains high. This means data are beating expectations overall.

Together, these indicators point to stronger-than-expected growth. Even with productivity gains and AI-linked shifts, this backdrop raises inflation risks. It also points to lower unemployment risks. As a result, the dollar may not weaken as much as some traders expect.

In short, the dollar market is tense and nuanced. Policy and political signals lean toward tolerance of a weaker USD. Meanwhile, the data argue against broad, aggressive dollar selling.

Technical Picture: Bullish Breakout Meets Stubborn Resistance

This macro tension shows up in EUR/USD price action. The pair produced a strong bullish signal, but it paused at a major resistance zone.

After a long consolidation in a bull pennant, EUR/USD broke higher last week. However, the move stalled just above 1.1900. This level has repeatedly capped rallies in the past.

EUR/USD failed to hold above 1.1900 in September last year. Similar setbacks occurred several times in the second half of 2021. Thus, the latest pause raises questions about the sustainability of the recent upside.

Momentum Indicators Still Favor the Bulls

Despite the stall, momentum signals remain supportive. The 14-day RSI is rising and not yet overbought. Meanwhile, the MACD has posted a bullish crossover and is moving higher.

From a momentum perspective, this suggests buying dips. However, repeated failures at 1.1900 mean traders should still be cautious.

Key EUR/USD Levels and Tactical Setups

A more constructive bullish approach is to wait for a daily close above 1.1900. Ideally, traders would also clear the September 2025 high. Only then should they increase long exposure materially. This would allow tighter risk control, with stops just below the breakout zone.

To the upside, the first target would be 1.1990. This level sits just below the 1.2000 barrier that was heavily defended in 2022. A clear break above 1.2000 would then shift focus toward the May 2025 high at 1.2267 and the December 2020 peak at 1.2350.

If 1.1900 continues to hold, traders could shift bias. In that case, short positions below 1.1900 could be considered. Stops would sit above the zone. The first downside target would be 1.1800, followed by the former pennant resistance area.

Event Risk: Busy Schedule, Muted Directional Power

The macro calendar this week is full, but it may not drive sustained FX trends. The broader backdrop remains complex, which could keep moves choppy.

In Europe, several euro area countries will release Q4 GDP estimates on Friday. The full EU figure will follow later in the day. Markets expect 0.2% quarterly growth, down from 0.3% in Q3. The annual rate is seen at 1.2% versus 1.4% previously. Germany will also publish inflation numbers on Friday, with headline CPI expected to rise to 2.1% year-on-year.

In the U.S., focus is on the Federal Reserve’s rate decision on Wednesday. With no updated projections and limited pricing for policy changes, the decision may not spark major volatility. Instead, markets will watch the statement and Chair Powell’s comments, especially on the labor market. Meanwhile, speculation that Rick Rieder could become the next Fed chair continues to circulate. That may have contributed to recent dollar softness.

On Friday, U.S. producer price figures will help shape expectations for the December PCE deflator. Weekly jobless claims on Thursday may be distorted by the Martin Luther King Jr holiday. Consumer confidence data and Treasury auctions will also add to the busy schedule. However, these events may only create short-term moves rather than sustained trends.