13/01/26

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The EUR/USD currency pair experienced a limited recovery on Monday, with gains halting near the 1.1700 resistance level before retreating to the mid-1.1600s. The decline was tempered by comments from John Williams, president of the New York Federal Reserve, who indicated that interest rates are approaching a neutral stance — moving from a modestly restrictive position — and that a robust economic outlook remains intact through 2026. Such remarks eased concerns about the Fed’s future policy trajectory, prompting a broadly weaker U.S. dollar during early trading.

Market sentiment was also influenced by reports suggesting that the U.S. government was initiating a criminal investigation into Federal Reserve Chair Jerome Powell. This development heightened concerns over the Fed’s independence and raised questions about the stability of the dollar’s reserve currency status. The probe is seen as an escalation in ongoing tensions, which could have broader implications for monetary policy and investor confidence. Despite these political tensions, Fitch Ratings highlighted the Fed’s autonomy as a key factor supporting the U.S. economy’s strong credit rating of AA++.

Looking ahead, attention will turn to the upcoming Consumer Price Index (CPI) report scheduled for release later this week. Analysts anticipate that inflationary pressures will remain above the Federal Reserve’s 2% target, with recent data indicating a slight uptick in core inflation in December. If results align with expectations, the data is likely to reinforce the view that the Fed will proceed with gradual policy adjustments rather than aggressive rate hikes.

From a technical perspective, EUR/USD is currently trading around 1.1659. Price action suggests a pullback from the top of a descending channel near 1.1700, with mixed signals from key indicators. The MACD remains above zero, albeit with diminishing momentum, while the RSI has dipped below 50, indicating a neutral-to-bearish tone. Support levels are identified near the midline of the channel at approximately 1.1650, with further support around 1.1618 and 1.1600. On the upside, a break above trendline resistance at 1.1694 could pave the way toward the recent high near 1.1740.

Inflation remains a critical factor affecting currency movements. The Consumer Price Index (CPI), which tracks changes in a basket of goods and services, is released monthly and serves as a key indicator of inflationary trends. Elevated CPI figures tend to support a stronger dollar, whereas subdued inflation can diminish its appeal. Given the Federal Reserve’s dual mandate of price stability and maximum employment, recent inflationary pressures have prompted a cautious approach to policy adjustments amidst ongoing global supply chain challenges.