Fed Decision Hangs in Balance as EUR/USD Range Reaches Breaking Point
The EUR/USD pair is at a critical juncture as markets await the Federal Reserve's decision tonight. The dollar's next move hinges on this outcome, and analysts are divided about what to expect. While economists lean towards a hold, with CME FedWatch odds near 68.5% for no change, Kevin Warsh's recent hawkish comments have pushed hike odds up sharply from just 18% two weeks ago to over 30% today.
The European Central Bank has already taken action, holding interest rates steady at 2.25% last Thursday and reaffirming the 2% inflation target while flagging energy-driven inflation risks from the Middle East conflict. Eurozone inflation cooled to 2.8% in June, but sticky services inflation near 3.5-4% keeps the door open for a September move.
The EUR/USD chart shows the pair consolidating within a defined range since late June, squeezed between an ascending trendline and a descending trendline. A bullish scenario could see price break above these trendlines and reclaim the 0.382 Fibonacci retracement near 1.1420, while a bearish surprise or hike could send the euro sharply lower.