EUR/USD Price to Range Amid US Politics, EU Concerns

• EUR/USD price remains flat after falling from daily highs.
• The removal of Fed Governor Cook created chaos in the market.
• The imposition of US digital taxes can initiate another trade war between the EU and the US.

The EUR/USD price remains flat near 1.1630, at the time of writing, during the early European session. The pair retreated from the intraday highs of 1.1660 as the uncertainty in the Eurozone grows, leaving traders cautious on near-term direction. On the other hand, the political turbulence in the US also adds to the market uncertainty.

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The immediate shock came from Washington, where the US President announced the removal of Fed Governor Cook over alleged mortgage fraud in Georgia. The Federal Reserve quickly rejected the move, with Cook herself stating that the President has no authority to fire a serving governor. Yet, the announcement rattled the market sentiment as the investors took this as an effort to weaken the autonomy of the central bank. The US dollar briefly fell but recovered as traders reassessed the risks of political intervention in Fed policy.

Markets now take Trump’s maneuver as a shot to replace Cook with a loyalist dove to initiate aggressive easing. The perception lent some support to the greenback, with stronger odds of a rate cut in September. However, dollar gains remain fragile amid institutional resistance to political interference.

Across the Atlantic, the euro failed to capitalize on dollar volatility as the French PM faces a confidence vote on September 08 after opposition parties rejected the proposal to cut budget spending. If the government is toppled, the euro could lose further. According to OCBC analysts, the broader concern is that France’s budget impasse could echo across Europe. This could shake investor confidence when growth concerns are already peaking.

Adding more pressure, President Trump threatened to impose digital taxes on all countries, directly targeting the EU’s Digital Services Act. This could trigger another transatlantic trade clash, limiting potential for euro rallies.

Data Ahead: Q2 GDP, Core PCE

There is no significant data due today. However, the US Q2 GDP and the US Core PCE Index are due later this week, which could provide impetus to the market.

EUR/USD price technical analysis: Buyers emerge at 1.1600

The 4-hour chart for the EUR/USD shows a strong support at 1.1600, despite a corrective downside after posting a bullish engulfing candle. Though the price moved below the key moving average, dip buying interest was seen, forming a pin bar.

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The RSI is below the 50.0 mark but tilting to the north, suggesting room for an upside. If the price sustains above the 1.1600 mark, it can retest the 1.1700 handle.

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