EUR/USD Slumps as Energy Prices Rebound, Dollar Strengthens Ahead of FOMC
The EUR/USD has taken a sharp decline as energy prices rebounded and the US dollar strengthened ahead of the Federal Reserve's FOMC rate decision, where a hike is now all but priced in. Rising oil costs are putting pressure on economies that import energy, while waning risk appetite due to tech sector weakness and calls for reduced AI investment also contribute to the bearish sentiment.
The technical EUR/USD forecast has taken a turn for the worse as the pair broke below its triangle pattern's lower trendline at 1.1565-80. This move takes support around this area, which could become a key resistance level moving forward.
Oil prices have resumed their upward trajectory after Saudi Arabia shut the East-West pipeline following drone attacks from Iraq, adding to the pressure on the EUR/USD and other FX majors. The ECB's increasingly hawkish tone is one source of support for the euro, but the central bank's actual ability to deliver further rate increases remains uncertain.
The dollar has started the week strong, with both domestic and external developments favoring a moderately stronger US currency. The Federal Reserve's rate hike on Wednesday will be closely watched, particularly regarding its message on inflation and potential future tightening.