Bullish View
- Consider buying the EUR/USD pair, setting your take profit at 1.2000.
- Implement a stop loss at 1.1700.
- Timeframe: 1-2 days.
Bearish View
- Think about selling the EUR/USD pair, aiming for a take profit at 1.1700.
- Set a stop loss at 1.2000.
The EUR/USD rate took a noticeable dip as traders responded to President Donald Trump’s nomination of Kevin Warsh for the position of Federal Reserve Chairman. This shift saw the exchange rate drop from last month’s peak of 1.2080 down to 1.1850.
Kevin Warsh Viewed as a Hawkish Candidate
On Friday, the EUR/USD rate declined significantly following Trump’s announcement of his choice for Fed leadership. In his statement, he revealed Warsh as his pick to take over from Jerome Powell when his term concludes in May.
Trump has had frequent disagreements with Powell regarding interest rate adjustments. He has been vocal about his desire for banks to lower rates to 1%, despite saying the economy is in good shape.
Although Warsh has recently supported cuts, he is expected to adopt a hawkish stance if he becomes chairman. His past criticisms of central banks for initiating quantitative easing and lowering rates prematurely add to this expectation.
Should he choose to implement early rate cuts, analysts might view him as merely following Trump’s agenda, whereas maintaining a hawkish position could lead to tensions with the president.
The upcoming US manufacturing PMI data will serve as another crucial factor for the EUR/USD exchange rate later today. Economists predict the PMI will rise to 51.9 in January, up from 51.8.
Comments from Rafael Bostic, a senior figure at the Federal Reserve, will also influence the market. Moreover, key macroeconomic data, such as the January jobs report, is anticipated to be released later this week.
The EUR/USD pair will also respond to the European Consumer Inflation Report due soon, which is expected to indicate a price decrease to 1.7% in January. Analysts predict the European Central Bank (ECB) will hold interest rates steady throughout the remainder of the year, with potential increases in 2026.
EUR/USD Technical Analysis
From a technical standpoint, the daily chart reveals that the EUR/USD exchange rate has retreated in recent days, falling from last week’s peak of 1.2080 to its current level of 1.1850.
On a brighter note, the pair remains above the supertrend indicator, as well as the 50-day and 100-day exponential moving averages (EMAs).
This suggests a possible rebound later this week, with the psychological barrier of 1.2000 expected to be a significant focus if that occurs.
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