EUR/USD. Price Analysis. Forecast. ECB Warns of Concerns About Euro Strength

[Ben Graham]

On Thursday, the euro remains virtually unchanged against the US dollar. The EUR/USD pair is struggling to find direction amid pressure from a strengthening dollar.

Earlier, the US dollar had dropped to its lowest level since February 2022, as investors took profits, fearing a long-term weakening of the currency amid aggressive trade policies by President Donald Trump and his criticism of the Federal Reserve. However, the dollar shows signs of a rebound, finding support from the reevaluation of the Fed's monetary policy outlook after the rate decision on Wednesday.

The central bank left rates unchanged, as expected, adopting a data-driven stance and noting its readiness to adjust in response to threats to its dual mandate.

At the same time, the risks of a declining dollar persist, bolstering the upward trend of EUR/USD and leaving room for further growth.

Meanwhile, the rapid strengthening of the euro is increasingly drawing the European Central Bank's attention, reviving concerns about the implications for monetary policy. The head of the Austrian National Bank and member of the ECB Governing Council, Martin Kocher, noted, "If the euro continues to gain strength, it may ultimately require a response in terms of monetary policy," clarifying that the focus is not on exchange rates as such, but on their impact on inflation, which directly concerns policy."

Following these comments, markets have assessed the probability of a rate cut at the September meeting at about 26%, up from approximately 16% previously. Nevertheless, it is anticipated that the ECB will keep interest rates unchanged at its next meeting on February 4-5.

For better trading opportunities in the EUR/USD pair, attention should be paid to the upcoming economic data to be released on Friday: preliminary GDP data and unemployment levels for the fourth quarter in the Eurozone, followed by the Producer Price Index (PPI) data in the US.

From a technical perspective, prices have shown resilience below the round 1.1900 level and have held 1.1950. Resistance is found at the round level of 1.200. If prices breach this level, they could challenge the January highs. Oscillators on the daily chart are positive, and the Relative Strength Index has exited the oversold zone, suggesting that the path of least resistance for the EUR/USD pair is upward.

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