EUR/USD’s latest bounce seems to have run out of steam just above 1.1900 the figure, with some mild resistance keeping a lid on gains for now. That said, the broader tone still feels constructive. Unless we see a clear shift in sentiment, the 1.2000 handle continues to stand out as the next logical upside objective.
The selling pressure keeps weighing on the European currency at the beginning of the week, with EUR/USD extending its bearish leg for the fifth consecutive day and breaking below the 1.1850 level.
The pair’s persistent decline this time comes on the back of further upside momentum in the US Dollar (USD), as investors continue to gauge the latest US CPI prints released on Friday, while gearing up for further key US data and the FOMC Minutes, all due later in the week.
Against that, the US Dollar Index (DXY) regains traction, leaves behind Friday’s hiccup and flirts with the area of three-day peaks north of the 97.00 barrier in a context of thin trade conditions and reduced volatility following the Presidents Day holiday in the US markets.
Fed: holding steady, sounding calmer
The Federal Reserve left the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its late January event, fully in line with expectations.
The shift was not in the decision but in the tone. Policymakers sounded a touch more confident about growth, while still admitting that inflation remains somewhat elevated. Crucially, the Federal Open Market Committee (FOMC) no longer sees employment risks as deteriorating. The vote passed 10 to 2, with two members dissenting in favour of a 25 basis points cut.
At the press conference, Chair Jerome Powell made it clear that the current stance is viewed as appropriate. Policy, however, remains strictly meeting by meeting, with no preset path. He played down recent inflation overshoots, attributing much of the surprise to tariff effects, and stressed that services disinflation is still progressing. Importantly, no one on the Committee is treating a rate hike as the base case.
The message is simple: confidence has improved, but there is no rush to move.
ECB: steady and sticking to the script
The European Central Bank (ECB) also stayed on hold, leaving its three key rates unchanged in a unanimous and widely expected decision.
The communication was calm and consistent. The medium-term outlook still points to inflation returning to the 2% objective, and recent data have not materially altered that view. Wage indicators are showing signs of stabilising, although service prices and pay dynamics remain under scrutiny. The Bank still anticipates a modest dip in inflation in 2026, reinforcing the idea that it can afford to wait.
President Christine Lagarde described risks as broadly balanced and reiterated that policy remains data dependent and agile. The Governing Council acknowledged recent foreign exchange moves, judged them to be within historical norms, and stressed once again that there is no exchange rate target.
In short, policy is not on autopilot, but it is not in a hurry either.
Markets currently price just over 11 basis points of easing by year-end, and the bank is widely expected to leave rates unchanged again at its March 19 meeting.
Euro positioning: strong conviction, growing tension
The latest data from the Commodity Futures Trading Commission (CFTC) show that speculative net long positions in the Euro (EUR) climbed to nearly 180.3K contracts in the week to February 10, the highest level since September 2020. On the surface, that keeps the positioning backdrop clearly constructive.
But if you look more closely, the picture becomes more complicated.
Institutional investors, mostly hedge funds, have also increased their short holdings to around 235.8K contracts, the most since May 2023. It’s interesting that both longs and shorts are going up at the same time. That suggests that both sides of the trade are becoming more sure of themselves, rather than just a simple continuation of bullish momentum.
Participation is expanding as well after open interest edged up to roughly 926.3K contracts, marking fresh record highs. This is not a squeeze. It is an actively contested market, with increasing engagement from both camps.
What it means for EUR/USD
Net positioning still favours the Euro, but the rise in opposing shorts means the market is no longer moving higher with ease. The trade is becoming more crowded and more sensitive to incoming macro catalysts.
In this kind of environment, further gains typically require validation, either through stronger euro area data or clearer policy divergence. Without that confirmation, volatility can pick up quickly as both sides press their case.
Focus back to the US, dollar risks remain
Near term: The US Dollar remains the dominant driver. Labour market data, inflation releases and geopolitical developments are likely to shape price action in the sessions ahead.
Risks: A Fed that stays cautious for longer continues to underpin the Greenback, particularly against an ECB that is effectively in wait and see mode. From a technical perspective, a clear break below the 200 day Simple Moving Average would increase the risk of a deeper corrective move.
Technical corner
In the daily chart, EUR/USD trades at 1.1850. The 55-day Simple Moving Average (SMA) rises above the 100- and 200-day SMAs, reinforcing a bullish undertone. All three SMAs slope higher while price holds above them, keeping buyers in control. The 55-day SMA stands at 1.1753 and offers nearby dynamic support. The 14-day Relative Strength Index (RSI) prints at 53.71, near the midline and consistent with steady momentum. The Average Directional Index (ADX) at 29.62 signals a firm trend, though strength has eased from recent highs.
Immediate resistance aligns at 1.2082, followed by 1.2266. Support is seen at 1.1766, then at 1.1578. With momentum steady above rising averages and trend strength still present, bulls could aim for the first resistance. A daily close under support would shift the bias toward the lower level.
(The technical analysis of this story was written with the help of an AI tool.)
Bottom line
For now, EUR/USD is being driven far more by the US narrative than by developments in the euro area.
With the Fed’s 2026 rate path still lacking clarity and the euro area yet to deliver a convincing cyclical rebound, upside progress is likely to remain gradual rather than turning into a clean and sustained breakout.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
