EUR/USD Analysis: Focus on FOMC Meeting and Technical Levels

The EUR/USD pair continues to face bearish pressure, approaching the critical 38.2% Fibonacci corrective level at 1.1666. Market participants are monitoring this level closely, as a rebound could signal a move back toward the 50.0% level at 1.1745. Conversely, a sustained break below 1.1666 increases the probability of a deeper decline toward 1.1568.

Technical Outlook and Wave Structure

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On the hourly chart, the broader wave structure remains technically bullish despite recent downward movement. The previous upward wave successfully surpassed multiple peaks, while the current correction has yet to challenge major support lows. However, a shift in the geopolitical landscape could quickly empower bearish traders to test the bullish trend's integrity.

On the four-hour chart, the pair has maintained a position above the 61.8% Fibonacci level of 1.1706. This consolidation suggests a potential recovery toward the 1.1778 level. If the pair fails to hold above 1.1706, the outlook shifts toward the US dollar, with the next target situated at the 1.1617 support level.

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Central Bank Focus and Geopolitics

The primary focus for the current session is the conclusion of the Federal Open Market Committee (FOMC) meeting. Although no immediate changes to monetary policy are expected, the event is significant as it marks Jerome Powell’s final meeting as Chairman. Markets anticipate a neutral stance as Powell prepares to hand over leadership to Kevin Warsh.

Beyond monetary policy, geopolitical tensions in the Middle East continue to act as a significant volatility driver for the pair. Traders are also awaiting a series of economic releases today, including German CPI and several US housing and durable goods reports. These data points may cause fluctuations ahead of the FOMC statement and Jerome Powell’s press conference.

Sentiment and Market Positioning

The latest Commitments of Traders (COT) report indicates a renewed bullish offensive among professional market participants. Long positions have increased to 217,000, while short positions have decreased to 176,000, widening the gap in favor of the euro. This data suggests that major players maintain a long-term interest in the single currency.

Short-term trading strategies currently focus on the interaction with the 1.1745 and 1.1666 levels. Rebounds from 1.1666 offer buying opportunities toward 1.1745, while failures at resistance provide entry points for short positions. Positions should be managed carefully given the high-impact nature of the evening's central bank announcements.

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