The EURUSD pair is testing a key resistance zone around the 1.1745 level due to a weaker US dollar, as the FOMC decision approaches. The USD faced pressure after an aligned US CPI report and surprisingly high initial jobless claims, which reached their highest since 2021.
The jobless claims were affected by a large spike in Texas, but still supported expectations for three rate cuts by year-end. The US dollar has remained rangebound, though increased dovish Fed bets have impacted it, with the bearish positioning possibly being at its peak.
Future Economic Activity
If future rate cuts lead to stronger economic activity, the 2026 rate cuts could be reconsidered, supporting the dollar. However, the current trend remains downward, needing strong data for a reversal. The ECB maintained its rates, with expectations of only minor easing by 2026.
On the daily chart, the EURUSD was rejected near 1.1789 and remained in range; a spike could see sellers target a drop to 1.16 support. Buyers aim for a break towards 1.1831. On the shorter-term charts, similar dynamics persist, with sellers positioned near 1.1745 and targeting lower levels, while buyers look to break higher.
Upcoming events include US Retail Sales data, FOMC policy announcement, and US Jobless Claims figures.
The EURUSD is pressing against a significant resistance zone near 1.1745 as we await this week’s FOMC decision. The dollar’s weakness was amplified last week after initial jobless claims unexpectedly jumped to 415,000, a level we haven’t seen since the post-pandemic recovery period of late 2021. This data, combined with an in-line CPI report showing inflation at a manageable 2.8%, has solidified bets on further Federal Reserve easing.
This monetary policy divergence is the core of the current market dynamic. Markets are now fully pricing in a third 25-basis-point cut at this week’s meeting, which would take the Fed Funds Rate to a 4.50-4.75% target range. In contrast, the European Central Bank has held its main rate steady at 3.50% for three consecutive meetings, signaling the end of its easing cycle which began earlier this year.
Trading Strategies
For derivative traders, this creates a clear setup around the current range. We see sellers stepping in near the 1.1745-1.1789 resistance, a strategy that has worked during the pair’s climb from the 1.10 levels we saw at the start of 2025. This approach positions for a move back towards the 1.1600 support level, betting that the dollar’s bearish sentiment may be stretched.
Alternatively, traders should be prepared for a breakout if the upcoming US data or FOMC announcement is more dovish than anticipated. A decisive move above 1.1789 would be a strong signal for buyers to target the next level of resistance around 1.1831. The key trigger for this would be the Fed signaling a faster pace of cuts for the remainder of the year.
Options can be an effective way to navigate this event risk. Buying EUR/USD put options with a strike price below 1.1700 offers a defined-risk way to position for a drop back to the 1.1600 support. Conversely, traders anticipating a dovish surprise from the Fed could purchase call options with a strike above 1.1800 to capture potential upside from a breakout.
All eyes will be on tomorrow’s US Retail Sales figures and, most importantly, the FOMC policy announcement on Wednesday. These events will likely determine whether the pair remains range-bound or the upward trend accelerates. We will also be watching the weekly jobless claims data on Thursday to see if last week’s spike was an anomaly.
