The Euro to US Dollar (EUR/USD) pair extended its bullish momentum into Thursday, breaching the 1.1700 level for the first time since September 2021. The six-day winning streak is powered by deepening market concerns over the US Federal Reserve’s independence, following President Donald Trump’s latest attacks on Fed Chair Jerome Powell.
Markets were rattled after a report by The Wall Street Journal revealed Trump may pre-announce Powell’s replacement as early as September, despite Powell’s term ending in May 2026. Investors fear the emergence of a “shadow Fed Chair” could undermine the central bank’s policy credibility, sending the US Dollar Index (DXY) tumbling to new multi-year lows.
Trump vs. Powell
Trump’s intense criticism of Fed Chair Jerome Powell has continued after Powell reaffirmed a “patient” approach to rate cuts because of ongoing inflation concerns. Trump referred to Powell as “terrible,” and suggested he would replace him if re-elected, with Kevin Warsh, Kevin Hassett, and Scott Bessent allegedly in consideration.
The remarks have heightened market fears over central bank independence, leading to a surge in rate cut expectations. According to the CME FedWatch Tool, the probability of a July rate cut rose to 24% from 14% last week, while odds for a September cut soared to 90% from 60%.
Mixed Economic Signals Limit Dollar Rebound
The U.S. economic calendar today highlights Durable Goods Orders for May, projected to bounce back by 8.5% after a steep -6.3% decline in April. Final Q1 GDP is expected at -0.2% quarter-over-quarter but still reflects strong annual growth of 3.7%.
Despite these headline numbers, underlying weakness especially in core durable goods excluding transportation could limit any upside for the U.S. Dollar. Markets are likely to maintain a cautious outlook unless data surprises to the upside.
Geopolitical Calm Dulls Safe-Haven Appeal
On the geopolitical front, the Israel-Iran ceasefire has held for a third consecutive day, easing fears of broader regional conflict. This has reduced safe-haven flows into the Dollar, adding to pressure on the currency. With focus shifting to trade uncertainties and Federal Reserve policy signals especially amid rising expectations for rate cuts the Dollar continues to struggle for direction, weighed down by both domestic and global factors.
EUR/USD Technical Analysis
The EUR/USD pair has broken above a bullish flag pattern and has tapped into the major 1.1700 level that is coincidentally at the 127.2% Fibonacci extension. While the 14 period RSI shows overbought conditions (specifically on the 4 hour timeframe), which could be signalling a pullback in the short-term, the bias remains EUR positive.
For this point of the cycle, punctuation support levels 1.1630, 1.1585, and 1.1520; and resistance at 1.1795 – the 161.8% Fibonacci level. Provided any uncertainty regarding Fed policy credibility continues, its likely USD will continue to weaken, and the Euro will likely maintain a bullish bias
Conclusion
With investor trust in the Fed wavering, the Euro remains in a commanding position. Unless incoming US data surprises to the upside or geopolitical risks flare up again, EUR/USD could stay buoyant, with bulls targeting 1.1795 in the near term. However, some technical correction is likely before the next leg up.
About The Author
