The EUR/USD pair has snapped back into focus after a surprise selloff in the U.S. dollar, triggered by news that the Department of Justice is investigating Fed Chair Jerome Powell over past testimony. This political shock raises concerns about Federal Reserve independence and, in turn, the U.S. dollar’s role as the world’s reserve currency. However, EUR/USD bulls still face stiff resistance amid a struggling European economy—setting up a major technical and fundamental showdown around key price levels and tomorrow’s U.S. CPI report.
Major Points Highlighted:
U.S. Dollar Selloff Driven by Political News
Reports of a criminal investigation into Fed Chair Jerome Powell sparked a sharp USD selloff.
Raises concerns about Fed independence and could undermine the dollar’s reserve currency status.
Source of Probe Uncertain
Initially seen as potentially orchestrated by former President Trump, new information suggests the inquiry may have originated from FHFA Director Bill Pulte.
Analyst doubts Trump would willingly sacrifice Powell as a “scapegoat” for economic weakness ahead of a new Fed Chair nomination in May.
EUR/USD Rally Faces Fundamental & Technical Hurdles
The Euro is the largest component of the DXY basket, so USD weakness supports EUR/USD.
But Europe’s weak economy has kept the pair range-bound for over six months, with strong resistance between 1.1686–1.1748 (Fibonacci zone).
CPI Report Could Decide Next Move
Tuesday’s U.S. inflation data is critical: a hot print would limit the Fed’s ability to cut rates, regardless of leadership.
Could also create divergence between Fed policy and Treasury rates—key for growth objectives.
Key Levels to Watch
Support: 1.1656–1.1669 (Oct/Nov swing highs), then 1.1616 (Dec low).
Resistance: 1.1686 (Fibonacci), 1.1717, and 1.1748.
A breakout above resistance could signal bullish momentum, while a hold suggests sellers remain in control.
Bottom Line: While political drama has given the Euro a boost, its sustained rally hinges on overcoming both technical resistance and Europe’s economic weakness—with tomorrow’s U.S. CPI likely to set the near-term direction for EUR/USD.
