EUR/USD traded near 1.1670 on Tuesday, holding slightly above its monthly low of 1.1616 as markets digested criminal allegations against Federal Reserve Chair Jerome Powell and positioned for a string of high-impact US data releases beginning with the CPI report later in the session.
The allegations represent something genuinely without precedent. Jerome Powell has become the first sitting Federal Reserve Chair in history to face a criminal charge. No Fed Chair has faced anything comparable in the institution’s 111-year history. The lawsuit centres on claims that Powell misled Congress about a $2.5 billion renovation of the Fed’s Washington headquarters. That project reportedly ran $700 million over its original budget. The charge has not triggered immediate market panic. But it has introduced a political risk premium into USD pricing that could linger. The dollar’s haven status depends partly on the perceived credibility of US monetary institutions. Anything that erodes that credibility reduces the premium investors attach to USD assets.
Compounding the institutional pressure, the White House has repeatedly pushed the Fed to cut interest rates. Powell has resisted. Now his legal position complicates that resistance in ways markets are still assessing. Federal Reserve independence is not just a constitutional question. It is a market-pricing variable. The legal case introduces a scenario where the Fed’s communication capacity becomes constrained at a critical policy juncture.
The technical picture was already unfavourable for EUR/USD bulls before Tuesday’s session opened. EUR/USD has fallen from a December 22 high of 1.1805 to near 1.1672 in a matter of weeks, breaking below the 50-day Exponential Moving Average and triggering the Supertrend indicator to turn red for the first time since October. That combination matters. The 50-day EMA now functions as dynamic resistance rather than support. The 50-day EMA crossover confirmed a structural shift in trend direction. Not a blip. Every failed rally back toward it strengthens the bearish case.
Most significant of all is the head-and-shoulders pattern taking shape on the chart. It ranks among the most reliable bearish reversal signals in technical analysis. The pattern signals the exhaustion of an uptrend and the beginning of a sustained decline, particularly when volume and momentum indicators confirm the structure. All three confirmation signals are currently present. Bulls face a difficult setup.
Support sits at the psychological 1.1600 level. A clean break below it opens further downside. Resistance concentrates between 1.1672 and 1.1805. Reclaiming 1.1805 would invalidate the head-and-shoulders pattern. That move requires significant fundamental catalyst. None appears imminent. Rallies toward resistance attract sellers rather than buyers.
The immediate data calendar runs through Wednesday. Tuesday delivers the Bureau of Labor Statistics CPI report, arriving against the backdrop of a weaker-than-expected December jobs print that showed the economy adding only 50,000 positions while the unemployment rate edged down to 4.4%. That jobs figure was soft by any measure. The CPI reading now carries double weight. Wednesday adds the Producer Price Index and US retail sales data. Retail sales will reveal whether consumers held up through December despite inflation. A weak reading puts additional pressure on the dollar. A strong one reinforces the hawkish rate path. Together they will shape the near-term rate narrative.
JPMorgan analysts expect the Federal Reserve to hold interest rates steady throughout this year, with a potential rate hike in 2026 if inflation stabilises on schedule. That is a hawkish baseline. It does not favour EUR/USD recovery. Higher US rates for longer attract dollar demand. EUR/USD rallies, in that environment, become selling opportunities. December 22’s 1.1805 peak already demonstrated that dynamic. The pair fell more than 130 pips from that level within weeks.
Pull all of it together. Criminal allegations against the Fed Chair. A head-and-shoulders pattern confirmed by multiple indicators. Bearish Supertrend. A macro calendar that leans hawkish. None of those factors individually would define the outlook. Together they create a coherent bearish case that requires a significant fundamental shift to displace.
The Powell story adds a dimension most technical analysts never priced into a dollar forecast. Political risk around central bank independence does not dissipate quickly. The Fed Chair’s legal situation will run in the background of every dollar trade for months. When it sits alongside a deteriorating technical picture, it tends to stay. The current setup exhibits both. 1.1600 is the number to watch. Everything else is context.
