Following several growth waves, the EURUSD currency pair has finally entered a corrective phase, with a potential downside target at 1.1870.
Market concerns over the US Federal Reserve’s (Fed) more hawkish stance than previously expected are a key fundamental headwind for the price, capping its upward momentum near the strong psychological resistance of 1.2000.
However, the list doesn’t end there. Let’s take a look at some other unfavorable factors for the pair:
Selection of the next Fed Chair. Kevin Warsh was nominated to take Jerome Powell’s place as the head of the American central bank in May. Investors viewed this news as a signal of more hawkish rhetoric, with the primary goal being to curb stubborn inflation. According to traders, Warsh could slow or stall the recently resumed easing cycle in the US.
Persistent inflation and tariff impact. A constant introduction of new import tariffs keeps the Consumer Price Index (CPI) elevated. In 2026, it is forecast to reach 2.7%. Therefore, market participants are forced to revise their predictions. Previously, up to three cuts were projected for the year, but now the probability of rates remaining at 3.5–3.75% at the March meeting is estimated at 86%.
Tighter fiscal environment. The harsh fiscal measures and protectionist policies expected from the new US administration are creating favorable conditions for the dollar. This dynamic could drive a deeper correction in the EURUSD pair toward 1.17–1.16 in the second half of 2026.
The overall recommendation is to sell EURUSD. Profits should be taken at the level of 1.1870. Stop Loss could be set at 1.1950.
Always size the position so that your potential loss (protected by a Stop Loss) is no more than 1% of your account balance. If you can't open a position that meets such a risk criterion, it's safer to skip this trade and wait for a better, lower-risk opportunity.
This content is for informational purposes only and is not intended to be investing advice.
