The EUR/USD pair gained 0.36% during the Asian trading session on Monday, reaching close to 1.1900. This upward movement is attributed to the continued decline of the US Dollar (USD), which is facing pressure ahead of the Federal Reserve”s (Fed) monetary policy meeting scheduled for Wednesday.
As of the latest data, the US Dollar Index (DXY), which measures the value of the USD against a basket of six major currencies, is trading about 0.4% lower at approximately 97.00. This marks a four-month low for the Greenback, which is under significant selling pressure due to ongoing uncertainties regarding the United States” long-term trade relationships. Despite some recent resolutions to trade tensions between Washington and various European Union (EU) nations, concerns linger.
The upcoming Fed meeting is particularly notable, as it is anticipated that the central bank will maintain interest rates within the range of 3.50%-3.75%. According to the CME FedWatch tool, this will be the Fed”s first pause after a series of three consecutive interest rate cuts. The Fed had previously lowered borrowing rates by 75 basis points (bps) toward the end of 2025 in an effort to bolster a struggling job market.
For the Euro (EUR), this week”s critical data releases will include the preliminary Q4 Eurozone Gross Domestic Product (GDP) figures and the January German Harmonized Index of Consumer Prices (HICP). These indicators could further influence the EUR/USD pair”s trajectory.
From a technical perspective, the EUR/USD is trading at approximately 1.1866 at the time of writing, remaining above the 20-day Exponential Moving Average (EMA) located at 1.1713, which indicates a bullish short-term outlook. The upward slope of the 20-day EMA confirms a strengthening trend. Furthermore, the 14-day Relative Strength Index (RSI) currently sits at 69.49, indicating that the asset is nearing an overbought condition, suggesting the potential for the price to revisit its multi-year high of 1.1919 shortly.
Should the pair achieve a daily close above this level, it could signal further upside momentum. Conversely, the 20-day EMA will likely serve as a significant support zone for the EUR/USD pair in the event of a downturn.
Understanding the implications of the Federal Reserve”s policies is crucial for investors and traders. The Fed”s dual mandate aims to ensure price stability and promote full employment. Adjustments to interest rates serve as the primary tool for the Fed to achieve these goals, impacting the strength of the US Dollar in global markets.
In summary, the current market dynamics surrounding the EUR/USD pair highlight the intricate interplay between monetary policy decisions and currency valuation, setting the stage for potential volatility in the forex market as traders await the Fed”s upcoming announcements.
