EUR – Powell's Criminal Investigation Damages Dollar, Euro Offers Slight Respite

The dollar weakened on Monday amid market concerns about a threat to the Federal Reserve's (Fed) independence. The euro, after more than two weeks of continuous declines, has managed to stabilize above the 1.16 level, rebounding on Monday and briefly approaching 1.17. The dollar faced renewed pressure on Monday after the Justice Department threatened to prosecute Powell for his congressional comments regarding cost overruns in the Fed's renovation program. Powell described this as a pretext to leverage interest rate decisions, and Trump's public pressure reignited concerns about the Fed's independence, dampening confidence in the dollar.

With key U.S. inflation data due on Tuesday, markets are also focused on the U.S. Supreme Court's potential ruling on the legality of Trump's tariff policies on Wednesday.

The EUR/USD exchange rate, as seen in the technical chart, has fallen nearly 200 points over the past two weeks. With Monday's stabilization, the RSI and Stochastic Oscillator have begun to rebound from oversold territory, suggesting the exchange rate can hold above 1.16 in the short term and may enter a period of consolidation. On the upside, the 25-day moving average at 1.1730 will be a key support level. If the exchange rate can return above this level, the euro is likely to stabilize, with subsequent resistance at 1.1770 and the high of 1.1809 from December 24th of last year. After that, attention will be focused on the high of 1.1918 from September 17th and the 1.20 level. On the support side, besides 1.16, the 200-day moving average is near 1.1580. If this area fails to hold, the euro is expected to begin a new wave of decline, extending its target to the 1.15 level and even 1.14.

Forecast range:
Resistance 1.1730 – 1.1770 - 1.1809 – 1.1918 - 1.2000*
Support 1.1580 / 1.1600 – 1.1500* - 1.1400

Key Focus:
Thursday
Eurozone November Industrial Production (18:00)

Friday
Germany December CPI‧HICP (15:00)
Eurozone November Trade Balance (18:00)
Eurozone November Industrial Production (18:00)

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