The EURUSD pair is currently testing a key resistance zone around 1.1745 due to a weak US dollar as we approach the FOMC decision. The dollar faced pressure after a US CPI report and a surprising spike in initial jobless claims, which reached their highest level since 2021. The jobless claims rose sharply in Texas, but overall, they support expectations of three rate cuts by the end of the year. Although the US dollar remains stable, increasing dovish expectations have affected it, suggesting that bearish positioning may be at its peak.

Future Economic Activity

If upcoming rate cuts boost economic activity, the 2026 rate cuts could be reassessed, which would likely support the dollar. However, the current trend is still downward, and strong data is needed for a turnaround. The ECB has kept its rates steady, with only minor easing expected by 2026. On the daily chart, the EURUSD faced resistance near 1.1789 and has stayed within range; a spike might lead to sellers targeting a drop to the 1.16 support. Buyers are looking to break through to 1.1831. Similar patterns are visible on shorter-term charts, with sellers active near 1.1745 and aiming for lower levels while buyers seek upward movement. Next week brings important events, including US Retail Sales data, the FOMC policy announcement, and US Jobless Claims figures. The EURUSD is pushing against a significant resistance zone near 1.1745 as we await the FOMC decision this week. Last week, the dollar’s weakness intensified when initial jobless claims unexpectedly jumped to 415,000, a level not seen since late 2021 during the post-pandemic recovery. This data, combined with a CPI report showing manageable inflation at 2.8%, has strengthened expectations of further easing from the Federal Reserve. This difference in monetary policy is driving current market dynamics. Traders are fully expecting a third 25-basis-point cut at this week’s meeting, which would lower the Fed Funds Rate to a target range of 4.50-4.75%. Meanwhile, the European Central Bank has kept its main rate steady at 3.50% for three meetings, indicating the end of its easing cycle that began earlier this year.

Trading Strategies

For derivative traders, the current range offers a clear strategy. Sellers are stepping in near the 1.1745-1.1789 resistance, a tactic that has worked as the pair has risen from the 1.10 levels seen at the beginning of 2025. This strategy aims for a move back toward the 1.1600 support, betting that the dollar’s bearish sentiment may be stretched. Traders should also prepare for a potential breakout if upcoming US data or the FOMC announcement is more dovish than expected. A decisive move above 1.1789 would signal buyers to target the next resistance level around 1.1831. The Fed signaling a faster pace of cuts for the rest of the year would be a key factor. Options can be a good way to handle this event risk. Buying EUR/USD put options with a strike price below 1.1700 allows for defined risk while positioning for a drop back to the 1.1600 support. On the other hand, traders expecting a dovish surprise from the Fed could buy call options with a strike above 1.1800 to benefit from a breakout. All attention will be on tomorrow’s US Retail Sales figures and the FOMC policy announcement on Wednesday. These events will likely decide if the pair remains range-bound or if the upward trend picks up speed. We will also monitor the weekly jobless claims data on Thursday to determine if last week’s spike was an anomaly. Create your live VT Markets account and start trading now.

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