The EUR/USD currency pair is currently around 1.1690, having risen 0.4% after bouncing back from lower numbers. This rise is boosted by an encouraging Eurozone Sentix Consumer Sentiment Index and a weak US Dollar, partly due to political challenges facing Federal Reserve Chairman Jerome Powell, who is under investigation for his Senate testimony. The New York Times recently reported on the investigation into Powell. He describes it as “unprecedented” and views it as an effort to sway the Federal Reserve’s decisions on interest rates. Additionally, tensions in Iran are increasing, leading to significant casualties and possible US intervention. On Monday, Atlanta Fed President Raphael Bostic’s speech may provide important clues about US monetary policy.

Eurozone Sentix Economic Confidence Index

The Eurozone’s Sentix Economic Confidence Index improved, rising to -1.8 in January from -6.2, marking the best result in six months. In the US, recent data indicates stability in the job market and enhanced consumer sentiment, supporting expectations for steady Fed interest rates. Technical analysis suggests that EUR/USD could face resistance near 1.1700, with potential support around 1.1615. The Euro is key in global trade, being the second most traded currency worldwide. The European Central Bank manages it and influences its value via interest rate policies, which are affected by inflation data and economic conditions. The ECB plays a crucial role in ensuring the Euro’s stability in foreign exchange markets. The unusual pressure on the Federal Reserve has sparked a “sell America” sentiment, making the US Dollar more vulnerable. For this reason, we recommend strategies that take advantage of a rising EUR/USD in the short term. Recent commitment of traders reports show a shift, with net-long Euro positions increasing by over 15% in the first week of January.

Volatility Ahead Of US CPI Data

The investigation into the Fed Chair brings a level of political uncertainty not seen for decades, increasing implied volatility. We think buying volatility through options, like straddles or strangles, is a smart strategy ahead of tomorrow’s US CPI data. Historically, even minor political conflicts in 2025 caused quick spikes in currency volatility, and the current situation is much more serious. Attention is focused on the upcoming US Consumer Price Index release, with market forecasts predicting a 3.1% year-over-year figure. If the number is lower than expected, it could reinforce the argument for rate cuts and further weaken the dollar. Conversely, a surprising rise would put the Fed in a tight spot and could lead to even greater market chaos. The growing violence in Iran is another relevant factor, contributing to a flight to safety. Unlike in 2025, the US Dollar is not seen as the main safe-haven asset due to domestic political issues. As a result, we are seeing capital move toward gold, which just reached a record high, and the Swiss Franc. Create your live VT Markets account and start trading now.

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