EUR/USD sits near 1.1408, pinned between two converging trendlines hours before the Fed decides. Hike bets have risen to over 30% from 18% two weeks ago, while CME FedWatch odds still sit near 68.5% for no change. A dovish outcome points toward 1.1480–1.1500; a hawkish one exposes 1.1360 and then 1.1320.
Tonight's Fed decision — not the ECB — will likely determine EUR/USD's next major direction, with the pair trading near 1.1408. Economists still lean toward a hold, yet markets genuinely don't know what to expect this time.
Hike odds climb past 30% as Warsh trims guidance
CME FedWatch odds sit near 68.5% for no change. However, hike bets have risen from just 18% two weeks ago to over 30% today, paired with growing internal FOMC support for a hike.
According to ActionForex, Kevin Warsh has "no tolerance" for inflation, and that hawkish rhetoric pushed hike odds up sharply. He has also deliberately scaled back forward guidance, meaning tonight's press conference may offer fewer clues than usual.
Trendlines converge around 1.1400
The pair has consolidated within a defined range since late June, squeezed between an ascending trendline and a descending trendline that both converge around the current price near 1.1400. The 200-period EMA continues to slope lower above price, reinforcing a cautious backdrop ahead of the decision.
Should the dollar weaken on a dovish Fed outcome, price would need to break above the converging trendlines and reclaim the 0.382 Fibonacci retracement near 1.1420. A confirmed break above the EMA would open the path towards the 0.5 and 0.618 retracements near 1.1480–1.1500, where stronger resistance has capped rallies since late June.
Conversely, a hawkish surprise — or even a hike — could send the euro sharply lower, breaking both the ascending trendline and the psychological 1.1360 support level. A confirmed break there would expose the 1.1320 zone, the 0.0 Fibonacci level marking the origin of the entire recovery move.
The ECB has already had its say
The ECB held rates steady at 2.25% last Thursday, as expected, with Lagarde reaffirming the 2% target while flagging that energy-driven inflation risks from the Middle East conflict have yet to fully play out. Eurozone inflation cooled to 2.8% in June, but sticky services inflation near 3.5–4% keeps the door only cautiously open for a September move in either direction.
ActionForex's own daily outlook keeps intraday bias neutral while the pair consolidates above 1.1323. With 1.1499 support turned resistance intact, that outlook remains bearish.
Breaking 1.1323 would resume the fall from 1.2081 towards the 100% projection at 1.1175, while a decisive break of 1.1499 would turn bias back to the upside for 1.1621 resistance.
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