EURUSD Recovers as Dollar Rally Pauses After Fed Shock

Key Points

• EURUSD traded near 1.1523, recovering from a low around 1.1478 after touching a two-month low earlier.
• The US dollar held near a more than two-month high after the Fed kept rates steady but signalled stronger rate-hike risk.
• Traders are watching 1.1547 resistance and 1.1519 support as the next short-term range.

EURUSD edged higher on Thursday after falling sharply in the previous session, as traders weighed a hawkish Federal Reserve hold against softer oil prices and a signed US-Iran interim deal.

The Federal Reserve kept rates unchanged in the 3.50% to 3.75% range, but nearly half of policymakers now expect another rate hike this year. That pushed Fed funds futures to price an 85% chance of tightening in December, giving the dollar a strong boost.

The dollar index held near 100.24 after surging 0.85% in the previous session, its biggest one-day jump in more than three months. EURUSD recovered slightly to trade around 1.1523, but the pair remains below the earlier swing high near 1.1615.

Why Traders Are Watching This

Traders are watching EURUSD because the pair is caught between hawkish Fed pricing and cautious relief from lower oil prices.

The dollar remains supported by expectations that the Fed may still raise rates later this year. A strong US retail sales reading added to that view, while new Fed Chair Kevin Warsh opened his term with a broad policy review and a more inflation-sensitive tone.

At the same time, oil prices eased after the US and Iran signed an interim agreement aimed at ending the war, reopening the Strait of Hormuz, and waiving US sanctions on Tehran’s oil. Lower oil prices can reduce inflation pressure, which may limit how far the dollar can extend its rally.

The euro also has some support after the European Central Bank recently raised rates, but EURUSD needs a stronger break above resistance before buyers regain control.

Key Trading Levels

EURUSD is trading close to its short-term moving averages, with the 5-period MA at 1.15231, the 10-period MA at 1.15218, and the 20-period MA at 1.15188.

That shows the pair is trying to stabilise after the sharp drop. However, the recovery remains modest, and price still needs to break above 1.1547 to show stronger upside momentum.

A move below 1.1519 would weaken the rebound and bring 1.1506 back into focus. A deeper break below 1.1478 would put sellers firmly back in control.

Bullish and Bearish Setups

The bullish setup depends on EURUSD holding above the moving average cluster and breaking 1.1547. That would show buyers are gaining confidence after the post-Fed sell-off.

The stronger breakout setup needs a move above 1.1588. If buyers clear that area, the wider recovery zone near 1.1615 comes back into focus.

The bearish setup builds if EURUSD falls below 1.1506. A move under that level would suggest the dollar is regaining control and could push the pair back toward 1.1478.

Disclaimer

The price levels and trade scenarios above reflect the author’s view at the time of writing and do not represent financial advice or an official recommendation from VT Markets. Traders should conduct their own analysis and manage risk carefully.

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What To Watch Next

Traders should watch 1.1547 resistance and 1.1519 support.

A break above 1.1547 could support a recovery toward 1.1588. A move below 1.1519 would weaken the short-term setup and shift attention back toward 1.1506 and 1.1478.

Beyond the chart, the next drivers are Fed rate-hike expectations, US retail sales momentum, ECB policy signals, oil price movement, and whether the US-Iran deal reduces inflation pressure enough to slow dollar demand.

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