EUR/USD: Fed in focus as price trades within a bearish channel

The US dollar’s pullback yesterday looked more like position-squaring ahead of today’s FOMC event than a genuine shift toward weaker dollar sentiment. Despite ongoing geopolitical tension and elevated oil prices, the dollar did not strengthen as much as expected, suggesting that for now markets are focusing more on central bank risk than on conflict headlines.

On the fundamental side, the Federal Reserve is widely expected to leave rates unchanged. The key question is whether the updated Dot Plot leans more hawkish. At present, the median projection points to one rate cut by year-end, broadly in line with market pricing. A revision toward fewer or no cuts in 2026 would likely support the dollar. On the other hand, any renewed emphasis on downside risks to growth or employment could keep hopes for easing alive and limit USD upside.

Chair Powell is also unlikely to give strong forward guidance on the inflation and growth effects of the current geopolitical backdrop, as conditions in energy markets remain too volatile. That means markets will likely rely more on the Fed’s projections than on Powell’s wording, while rate expectations may stay fluid and continue reacting to oil price swings. In that environment, any bullish dollar reaction after the Fed may prove positive but short-lived.

From a technical perspective, EUR/USD remains confined within a descending dashed channel, keeping the short-term bias tilted to the downside. As long as price respects that structure, the pair may continue grinding lower toward the 1.1200 area, which also aligns with the broader support zone highlighted on the chart.

That said, the next move will depend heavily on tonight’s FOMC commentary and tomorrow’s ECB outcome. A less hawkish Fed or a supportive ECB tone could trigger a break above the channel, leading to a corrective rebound before sellers re-emerge. In other words, even if the broader trend remains bearish, there is room for a short-term recovery if event risk disappoints dollar bulls.

For now, the technical picture suggests EUR/USD is still trading in a bearish corrective structure, with 1.12 remaining a realistic downside target, unless central bank communication sparks a channel breakout and temporary upside correction.