The upcoming week is filled with important fundamental events, which puts the EUR/USD pair at a critical juncture—it could either move toward the 5th figure range or descend to the 3rd figure range. Last week, the EUR/USD recorded a high of 1.0507 and a low of 1.0401, closing on Friday at 1.0461, which is essentially in the middle of this price range. This outcome reflects the indecision among both buyers and sellers in the EUR/USD market.
For an upward movement to develop, buyers need to consolidate above the 1.0550 target (the upper line of the Kumo cloud on the daily chart), while for a resumption of the downtrend, bears need to consolidate below 1.0400 (the lower Bollinger Bands line, which coincides with the lower boundary of the Kumo cloud on the H4 timeframe). By the end of the final week of February, the pair is likely to determine its direction, given the intensity of the economic calendar.
Monday
EUR/USD traders will focus on Germany at the start of the new trading week. On Sunday, snap Bundestag elections will determine the country's new chancellor. This event could significantly impact the pair only if Germany experiences a major "shift to the right." A poll published two days before the elections showed the CDU/CSU bloc in the lead with 28% support. The far-right Alternative for Germany (AfD) held second place with 21%, while the ruling SPD and Greens lagged with 16% and 14%, respectively. Given this outcome, the only viable government coalitions would be CDU/CSU-SPD or CDU/CSU-Greens, effectively forming another centrist-left parliamentary bloc. The most likely chancellor candidate is CDU leader Friedrich Merz. In this scenario, EUR/USD traders may either ignore the election results or show a short-term interest in the euro, allowing buyers to push toward the 5th figure again. However, if the far-right gains significantly more support than expected, the euro could come under considerable pressure even though a coalition involving the AfD remains highly unlikely.
Monday's key macroeconomic report will also come from Germany. The IFO Business Climate Index is expected to increase slightly to 85.9 (from 85.1 in January), and Germany's Business Expectations Index is forecasted to rise slightly to 84.9 (from 84.2). This release will influence EUR/USD only if the actual figures deviate significantly from expectations.
The final estimate of January's CPI in the eurozone will also be published. Forecasts suggest it will match the preliminary estimate (headline inflation at 2.5% y/y, core at 2.7%).
Tuesday
The Conference Board's Consumer Confidence Index will be released during the U.S. trading session. This index is based on household surveys regarding confidence in the current and future state of the economy. It has been declining for the past two months, and February is expected to continue this trend. Forecasts indicate a drop to 103.3 (from 104.1 in January). The dollar will come under strong pressure if the index falls below 100.00 for the first time since last September, especially in light of weak January retail sales data.
Key speakers on Tuesday include Federal Reserve Governor Michael Barr, Richmond Fed President Thomas Barkin (non-voting member this year), and Dallas Fed President Lorie Logan (also a non-voter in 2025).
Wednesday
The economic calendar for Wednesday is mostly empty for EUR/USD. During the U.S. session, new home sales data will be released. In December, there was a 3.6% increase, and January is expected to show a 4.0% rise. While this is a positive sign for the dollar, it is unlikely to have a major impact on the currency pair.
Additionally, Atlanta Fed President Raphael Bostic is scheduled to speak. However, since he does not have a voting role until 2025, his remarks are unlikely to cause significant volatility.
Thursday
On Thursday, key macroeconomic reports will be released from the U.S. The second estimate of GDP growth for Q4 2024 will be published. The initial estimate indicated a 2.3% increase, a decline from 3.1% in Q3. Most analysts anticipate that the second estimate will confirm this figure. However, if the revision unexpectedly shows an upward adjustment, demand for the dollar may increase due to heightened hawkish sentiment. It is important to note that the final estimate was unexpectedly revised up from 2.8% to 3.1%.
Additionally, the U.S. will release pending home sales data for January, an early indicator of housing market activity. Sales fell by 5.0% in December, but January is expected to show a 3.2% increase. This release could provide moderate support for the dollar.
Key speakers on Thursday include Fed Governor Michelle Bowman, Fed Governor Michael Barr, Kansas City Fed President Jeffrey Schmid (a voting member in 2025), and Cleveland Fed President Beth Hammack (non-voting).
Friday
The week's last trading day is expected to bring high volatility for EUR/USD. The U.S. will release the critical Core PCE Price Index for January, a key inflation gauge closely monitored by the Federal Reserve. In December, the index remained at 2.8% y/y, despite forecasts for a slight decline to 2.7%. The indicator has been stuck at 2.8% for three consecutive months, following a two-month stagnation at 2.7% (and before that, two months at 2.6%). Preliminary forecasts suggest that January's Core PCE will again come in at 2.8%, marking a four-month plateau. Even a minor increase (to 2.9% or higher) would significantly support the U.S. dollar.
Technique
From a technical perspective, the pair trades within the Kumo cloud on the daily chart stuck within the 4th-figure range. Last week, EUR/USD buyers attempted to break above the 1.0500 target but failed. A similar attempt was made the previous week, but it was unsuccessful. On the other hand, sellers tried to push the price into the 3rd-figure range but stalled at 1.0401.
As mentioned earlier, for further upward movement, bulls need to consolidate above 1.0550 (the upper boundary of the Kumo cloud on the daily chart). If successful, the Ichimoku indicator will generate a bullish Parade of Lines signal. Meanwhile, short positions should only be considered if the pair makes a decisive move below 1.0400 (the lower Bollinger Bands line coincides with the lower boundary of the Kumo cloud on the four-hour chart).
In essence, EUR/USD is at a crossroads—either heading toward the 5-6 figure range or dropping into the 3rd figure range, with the potential for further declines below 1.0300. At the moment, the technical picture reflects uncertainty, with no clear signals favoring either direction.
