EUR/USD starts new week under pressure as Fed hawkishness weighs on Euro

EUR/USD remains under pressure after Fed rate hike

EUR/USD enters the new week on the back foot after coming under heavy selling pressure last week following the Federal Reserve's decision to raise interest rates by 25 basis points to 4%.

The rate hike was accompanied by a hawkish tone from the Federal Reserve, with policymakers continuing to highlight inflation as a key concern. The stronger-than-expected policy stance boosted demand for the US Dollar and weighed on the Euro, sending EUR/USD more than 0.80% lower for the week to close at 1.1486.

During the post-meeting press conference, the Fed indicated that it expects only one additional rate hike this year, with no further increases currently projected for 2027. The guidance reinforced expectations that US monetary policy could remain relatively restrictive, providing further support for the Dollar.

Central bank divergence remains in focus

The Federal Reserve's decision was not the only major central bank event last week, with several policymakers delivering important interest-rate decisions.

The Bank of England kept its benchmark interest rate unchanged at 3.75%, with the decision passing by a 6-3 vote. Three policymakers backed a 25-basis-point rate hike, highlighting the continued divide within the Monetary Policy Committee over the inflation outlook.

Meanwhile, the Bank of Japan raised its policy rate by 25 basis points to 1.25%. However, the move failed to generate sustained strength for the Japanese Yen as the widening policy dynamics continued to favour the US Dollar.

USD/JPY surged more than 2% during the week, briefly reaching the 158.00 area and recovering a significant portion of the losses recorded earlier in the month.

Markets turn to PMI data and central bank speakers

The economic calendar is relatively lighter this week, shifting attention toward global Purchasing Managers' Index (PMI) data, speeches from Federal Reserve officials and the Swiss National Bank's interest-rate decision.

The PMI releases will provide fresh insight into the health of major economies and could influence expectations surrounding future monetary policy. Meanwhile, comments from Fed officials will be closely watched for further clues about the central bank's outlook on inflation and interest rates.

The Swiss National Bank's policy decision will also attract attention as traders assess the outlook for the Swiss Franc and broader European currency markets.

With major central bank decisions now behind the market, interest-rate expectations, economic data and central bank communication are likely to remain the key drivers of currency-market volatility this week.

Technical outlook

The EURUSD from the daily time frame still remains bearish as the current price return back below the descending trendline running from February 2026 could spark further sell-off should the price fail to find support around 1.1465.

Bearish scenario

The most important level for sellers is the 1.1465-1.1485 area which serves as a strong confluence. If price rejects and begins trading below 1.1465, we could see an influx of sellers with possible targets around 1.1400-1.1360. A decisive break below 1.1360 would significantly strengthen further bearish structure and open the door to deeper downside.

Bullish scenario

The Key area for buyers is 1.1485-1.1500. Should the price close convincingly above the region to hold as support, then the long-term trendline could transition from resistance into support. This would see buyers target 1.1550-1.1600-1.1700 resistance levels.