Euro-to-Dollar Short-term Forecast: Struggling, Despite Cook's Firing

File image of Lisa Cook, source: Federal Reserve, public domain.

The Dollar looks well supported into month-end, despite U.S. President Donald Trump's firing of Governor Lisa Cook.

The Dollar is managing to hold the Euro at bay as a period of consolidative trading continues to play out and leaves us in a rather listless setup.

The Euro to Dollar pair is showing a strong preference to stay within the bounds of the 50%-78.6% Fibonacci retracement of the July fall that took it from the 2025 high at 1.1830 to 1.14.

Above: Euro-Dollar at daily intervals.

The 78.6% retracement level at 1.1736 is our short-term resistance and where Friday's post-Jackson Hole rally faltered. Monday's selloff was rapid, and almost ate up the entirety of Friday's advance, warning that Euro-Dollar is struggling to build up a head of steam.

The net result is the market is back below the nine-day exponential moving average, which shifts our Week Ahead Forecast model now looks for subdued trading over the next handful of days.

To be sure, we think the Euro looks relatively well supported above 1.1610, the 50% Fibonacci line, and the preference is for more sideways churn near-term until some clear directionality can re-establish.

Beyond the next few days, our preference remains that the consolidative move will evolve to the upside, in a show of respect for the broader 2025 rally.

The fundamental underpinnings back up this technical slant: the Federal Reserve is about to cut interest rates again in September and the White House is heaping pressure on the Fed to deliver more beyond this date.

Trump's efforts to rebuild the Federal Reserve in his image reached a new milestone on Monday when he fired a sitting governor, the first time this has ever been attempted.

The Dollar initially fell after Trump said he was removing Governor Lisa Cook owing to irregularities in a mortgage application. Although it soon recovered, these developments are likely to undermine the currency's longer-term setup, say economists.

Having initially targeted Fed Chair Jerome Powell, even threatening to remove him over the costs associated with a revamp of the Fed's Washington headquarters, it's Governor Lisa Cook that is now under pressure.

"The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and possibly criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity," said in a letter to Cook.

"This is a kill shot at Fed independence," said Aaron Klein, at the Brookings Institution. "Trump is saying the Fed is going to do what he wants it to do, by hook or by crook."

Cook's removal by Trump would be the first example of a President removing a governor. This has never been done before, as the Fed is designed to be independent of the Executive branch. A President can only fire a governor for cause.

Laws that describe "for cause" typically define instances of inefficiency, neglect of duty or malfeasance (wrongdoing).

Cook became a target after Federal Housing Finance Agency Director Bill Pulte said she lied on loan applications for two properties, one in Michigan and one in Georgia, claiming she would use each property as her primary residence to secure more favourable loan terms.

Cook has appointed lawyers and will fight the decision.

"Were Cook's dismissal to hold, it would open up another seat for Trump to fill on the seven-person Federal Reserve Board. With Stephen Miran nominated for the seat recently vacated by Governor Kugler and with Governors Waller and Bowman dissenting in favour of a rate cut at the July meeting, this would increase the prospects of a dovish majority on the Board," says Sidorov.

A dovish slant to the Fed would imply a tendency to err towards lower interest rates, sapping the Dollar's yield support and underpinning a downtrend that started at the start of the year.