EUR/USD rose over 1.3%, hitting a five-year high of 1.2082 after US President Donald Trump expressed support for a weaker Dollar. This led to a sell-off, causing the US Dollar Index (DXY) to drop to 95.79. In a Fox News interview, Trump showed little concern about the Dollar’s changes and mentioned 25% tariffs on South Korean goods due to unmet trade agreements, putting pressure on the US currency.

Economic Indicators Show Weakness

US economic indicators revealed a decrease in Consumer Confidence, falling to 84.5 in January, the lowest level since 2014. The average ADP Employment Change also weakened, dropping from 8,000 to 7,750. In Europe, officials from the European Central Bank (ECB) decided to keep economic policy steady. Joachim Nagel indicated there was no immediate need for interest rate changes, while Martin Kocher signaled readiness for potential adjustments. The Euro continues to strengthen against major currencies, rising by 1.41% against the USD. The EUR/USD uptrend remains strong, with key resistance levels at 1.2150 and 1.2200, unless it falls below 1.2000. Trump’s clear support for a weaker Dollar signals a shift for the upcoming weeks. This political backing, along with the “sell America” narrative driven by new tariffs, reinforces a bullish outlook on EUR/USD. The rise past the psychological level of 1.2000 indicates strong momentum to follow.

Strategy and Investment Opportunities

The decline in US economic data, especially the drop in consumer confidence to 84.5, supports a bearish view on the Dollar. This is a significant fall from the stable levels near 108 seen at the end of 2025. This downturn could limit the Federal Reserve’s flexibility, making it hard for them to adopt a hawkish stance in their next meeting. Conversely, the European Central Bank seems content with the Euro’s strength. Their consistent commentary aligns with the cautious, data-driven approach we’ve noticed in the last part of 2025. The differing policies between a possibly dovish Fed and a neutral ECB should continue to push EUR/USD higher. For our positions, purchasing EUR/USD call options expiring in the next month or two seems wise to capture potential gains toward the 1.2150 and 1.2200 targets. However, with the Relative Strength Index (RSI) approaching an overbought condition at near 77, a short-term pullback may occur. This suggests that entering new long positions on dips toward the 1.2000 level might be a better strategy than chasing the rally at its peak. Create your live VT Markets account and start trading now.

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