EUR/USD Falls After Fed Decision as Dollar Strengthens

On Wednesday, policymakers voted 11–1 to keep the key interest rate unchanged at 3.50–3.75%. At the same time, GDP forecasts for the current year were revised upward from 2.3% to 2.4%, while inflation expectations increased from 2.4% to 2.7%. Fed Chair Jerome Powell stated that rising energy prices amid the US-Iran confrontation would impact the pace of consumer price growth. However, he emphasized that there is still insufficient data to assess the scale and duration of these effects, which markets interpreted as a signal of a cautious approach to monetary policy adjustments in the near term. The dot plot showed that most policymakers expect one rate cut in 2026 and another in 2027, although the number of officials favoring a more hawkish stance increased from six to seven.

Additional pressure on non-dollar assets comes from the escalation of tensions in the Middle East. While both sides had previously avoided targeting energy infrastructure, attacks have now begun on oil facilities in Saudi Arabia, Iran, and Qatar, including LNG processing plants in Ras Laffan. Meanwhile, the US Department of Defense has requested an additional 200.0 billion dollars in funding, suggesting that the conflict may continue for an extended period and raising concerns about a potential global economic slowdown.

At 15:15 (GMT+2), the European Central Bank will release its policy decision. Analysts expect the ECB to maintain its key rate at 2.15%, with the deposit rate at 2.00% and the marginal lending rate at 2.40%. However, the regulator may hint at a more hawkish stance if inflationary pressures in the eurozone intensify due to developments in the Persian Gulf, which could slow the downside momentum in EUR/USD.

Support and resistance levels

A new downtrend is forming, with the pair attempting to consolidate below 1.1474 (Murray level [2/8]). A confirmed break below this level could open the way toward 1.1230 (Murray level [0/8]) and 1.1108 (Murray level [–1/8]). Alternatively, if the price breaks above 1.1718 (Murray level [4/8]) and moves above the Bollinger Bands midline, upward momentum may resume toward 1.1962 (Murray level [6/8]) and 1.2207 (Murray level [8/8]).

Technical indicators maintain a sell signal: Bollinger Bands are turning downward, the MACD histogram is expanding in negative territory, while Stochastic is turning upward from oversold levels, suggesting the possibility of a limited corrective rebound.

Resistance levels: 1.1718, 1.1962, 1.2207.

Support levels: 1.1474, 1.1230, 1.1108.

Trading scenarios and EUR/USD forecast

Short positions may be considered below 1.1474 with targets at 1.1230 and 1.1108 and a stop-loss at 1.1600. Timeframe: 5–7 days.

Long positions may be considered above 1.1718 with targets at 1.1962 and 1.2207 and a stop-loss at 1.1580.