EUR/USD Plunges to One-Month Low as Fed Decision Looms

The EUR/USD currency pair reached a one-month low of 1.1386 on Wednesday, with resistance stacked at 1.1407, 1.1415, and the 200 EMA at 1.1452.

The Federal Open Market Committee's decision at 2:00 p.m. ET today holds significant importance, with roughly one-third hike odds priced for a surprise 25 basis point increase in the target range of 3.50%-3.75%. Traders assign an 80% probability to a rate increase at the September meeting.

A hold today does not remove tightening from the dollar curve but relocates it by seven weeks, and the statement language will move EUR/USD considerably more than the decision itself.

The transmission into EUR/USD runs through the front end of the Treasury curve, with higher expected policy rates lifting US yields and widening the dollar's carry advantage over the euro.