EUR/USD Reclaims 1.1600 as DXY Retreats, Key Economic Data Ahead

[Ben Graham]

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EUR/USD continued its slide to trade below the 1.1600 handle as markets await key US data. The US Dollar has shrugged off concerns around FED independence after US President Trump announced his intention to fire Fed policymaker Lisa Cook.

The question is whether or not the US Dollar will face another selloff if President Trump succeeds with his plan?

Trump’s Move to Fire Fed Policymaker Cook

First, Cook is fighting the decision, and it will likely end up in court. Second, her exit won’t have much effect on upcoming meetings. With Powell still leading, markets expect decisions to stay focused on data, and the small number of dovish voices isn’t enough to push for faster or bigger rate cuts.

The real impact of politics on the Fed will likely show after Powell’s term ends in May 2026, unless Trump removes him earlier. By then, a new Fed chair with a preference for rate cuts would still need support from the committee, but that’s too far ahead for markets to predict. Plus, if Powell lowers rates by 100 basis points to around 3.5% as expected, the new chair would have less room to cut further.

So far, the biggest market effect has been the poor performance of 30-year Treasuries. However, selloffs in long-term Treasuries are more likely to hurt the dollar when caused by fiscal worries rather than inflation. With short-term yields staying steady, it’s no surprise the dollar remains strong.

German GfK Consumer Sentiment Falls

Germany’s GfK Consumer Climate Indicator dropped to -23.6 for September 2025, down from -21.7 in August, missing predictions of -22.0. This is the lowest level since April.

The income outlook fell sharply (4.1 vs 15.2 in August), ending five months of improvement and hitting its lowest point since March. This was due to growing fears of job losses, inflation uncertainty, and the effects of U.S. trade policies.

Economic expectations also dropped (2.7 vs 10.1), marking the second monthly decline and the lowest level in six months, as hopes for a recovery this year faded after a rough start for the new federal government.

Willingness to spend fell for the third month (-10.1 vs -9.2), reaching its lowest since February. Meanwhile, the tendency to save slightly decreased (15.8 vs 16.4), offering little relief.

“With this third drop in a row, consumer sentiment is clearly stuck in a summer slump,” said Rolf Bürkl, Head of Consumer Climate at NIM.

Euro Resilient in Face of Uncertainties in France

Despite the drop in German consumer sentiment and the cloud hanging over France, the Euro has remained resilient.

French Prime Minister François Bayrou has tied his €44 billion budget plan to an important confidence vote in parliament on September 8. This has sparked worries that the government could collapse or new elections might be called, creating uncertainty about political stability in the Eurozone's second-largest economy.

The political instability and potential for snap elections in France continue to grow, but similar to the US markets, the Euro appears unfazed for now.

Looking Ahead

Market participants will now turn their attention to a slew of high impact data releases to end the week.

Thursday’s schedule is important, featuring Eurozone confidence surveys and the ECB’s meeting notes, which could reveal more about their recent discussions on inflation and growth. In the U.S., Weekly Jobless Claims will give an early look at the job market, while Friday’s Core PCE Price Index, the Fed’s favorite inflation measure, will be the week’s main highlight.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar.

Technical Analysis - EUR/USD

EUR/USD has bounced off a key area of support today resting at 1.15800 which was the recent swing low on August 25.

Having failed to record a four-hour candle close below this level, the recent change in character favoring bulls remains in play.

Currently trading around the 1.1640, there is resistance ahead at the 1.1650 handle before the 1.1700 and 1.1750 areas come into focus.

The period-14 RSI is just below overbought territory and may worth watching.

There is alos the bull flag pattern which is in play with the top end of pattern resting around the 1.1740 area. A four-hour candle close above this level could set the stage for a 380 odd pip move to the upside. This would take EUR/USD beyond the 1.2000 handle.

Support may be found at 1.1580, 1.1527 and of course the crucial 1.1450 handles.

EUR/USD Four-Hour Chart, August 27, 2025

Source: TradingView.com (click to enlarge)

Client Sentiment Data - EUR/USD

Looking at OANDA client sentiment data and market participants are Long on EUR/USD with 61% of traders net-long. I prefer to take a contrarian view toward crowd sentiment and thus the fact that the majority of traders are net-long suggests that EUR/USD prices could continue to slide in the near-term.

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

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