EURUSD returns close to 1.17 as fresh concerns about the Federal Reserve's autonomy put pressure on the US Dollar

Market Fundamentals Overview

US Dollar (USD) Update

The US Dollar experienced widespread declines today after the Department of Justice issued a subpoena to the Federal Reserve—a rare move that intensifies the ongoing dispute between President Trump and Fed Chair Powell regarding the pace of interest rate reductions.

Officially, the DOJ claims its investigation centers on the renovation of the Federal Reserve’s headquarters, specifically whether Powell misrepresented details about the project’s size, expenses, or luxury elements to the Senate Banking Committee.

However, it is widely believed that this action is politically motivated, aiming to pressure the Fed Chair into accelerating rate cuts. Similar tactics were observed last year when President Trump unsuccessfully attempted to dismiss Fed Governor Cook, a case still awaiting a Supreme Court verdict.

The US Dollar weakened on these developments, as any threat to the central bank’s autonomy raises concerns about potential future inflation and currency devaluation. Nevertheless, the likelihood of the Fed losing its independence remains minimal, given the significant repercussions such an event would have both domestically and globally.

Looking ahead, the US Consumer Price Index (CPI) report is scheduled for release tomorrow and could significantly influence market sentiment. A higher-than-expected reading may prompt markets to anticipate a more aggressive stance on interest rates, which would likely bolster the dollar. Conversely, weaker data could reinforce expectations for at least two rate cuts by year-end, putting further pressure on the greenback. Overall, the outlook for the USD is neutral to slightly bearish.

Euro (EUR) Insights

The European Central Bank (ECB) continues to maintain a neutral stance, emphasizing a data-driven, meeting-by-meeting approach to policy decisions. ECB officials have reiterated that current monetary policy is suitable and that minor or short-term deviations from the 2% inflation target will not prompt immediate action. They have also indicated that future moves could involve either a rate cut or an increase. Recent economic data, including last week’s lower-than-expected inflation figures, support this cautious approach. The euro’s prospects remain balanced for now.

EURUSD Technical Analysis – Daily Chart

On the daily timeframe, EURUSD surged in response to the DOJ’s subpoena of the Federal Reserve concerning its headquarters renovation. The pair is nearing a significant resistance zone around 1.17, which also aligns with a descending trendline, creating a potential area of confluence.

Sellers may look to enter positions near this resistance, placing stops above the trendline in anticipation of a move toward new lows. Conversely, buyers will be watching for a breakout above this level, which could pave the way for a rally toward the 1.18 region.

EURUSD Technical Analysis – 4-Hour Chart

The 4-hour chart highlights a sharp upward move following the DOJ news, effectively reversing most of the dollar’s gains from the previous week. At current levels, sellers may find more favorable risk-to-reward opportunities to target further declines, while buyers will be looking for a decisive breakout to signal continued upward momentum.

EURUSD Technical Analysis – 1-Hour Chart

Examining the 1-hour timeframe, EURUSD is currently trading at the upper end of today’s average daily range. In such scenarios, it is common to see the market consolidate or retrace before the next significant move unfolds.

Key Events to Watch

• Tomorrow: Release of the US CPI report.
• Wednesday: November US Retail Sales and Producer Price Index (PPI) data, along with a possible Supreme Court ruling on Trump’s tariffs.
• Thursday: Latest US Jobless Claims figures.