Fed Rate Decision Could Send EUR/USD Back to 1.17 - Citi

Investors are bracing for the Federal Reserve's interest rate decision next week, which could send the dollar tumbling and EUR/USD back toward its summer highs near 1.17, according to Citi strategists.

The Fed is expected to hike rates with a 'dovish' tone, potentially triggering a sell-the-news reaction in the dollar, Citi said. This move could weigh on the greenback tactically if traders respond by selling it following the decision.

However, geopolitical risks and attractive U.S. real interest rates may limit the scale of any dollar decline. The euro's recent gains have been complicated by European Central Bank policy responses to energy shocks and changes in countries' terms of trade.

The technical outlook for EUR/USD suggests that holding above 1.1575 leaves the near-term risk-reward tilted toward further gains, but geopolitical pressures could constrain the upside.