Euro Holds Above 1.1350 as Dollar Rally Pauses Ahead of Fed Decision

The euro is trading just above the 1.1350 mark against the US dollar on Monday, hovering near its lowest level in a month as currency markets enter a cautious holding pattern ahead of the Federal Reserve’s two-day policy meeting that begins Tuesday.

Dollar bulls take a breather

The US dollar has been on a steady upward trajectory in recent weeks, driven by stronger-than-expected economic data and hawkish commentary from Fed officials. However, the greenback’s rally has paused in early European trading, allowing the euro to stabilize above the key 1.1350 support level. This level has acted as a floor for the single currency since late January, and a break below it could open the door to further losses toward the 1.1200 region.

All eyes on the FOMC

The primary catalyst for the next directional move in EUR/USD will be the Federal Open Market Committee (FOMC) decision on Wednesday. Markets are widely expecting the Fed to hold interest rates steady at 4.25%-4.50%, but the focus will be on the accompanying statement and Chair Jerome Powell’s press conference for clues about the future path of monetary policy.

Traders are particularly attentive to any shifts in language regarding inflation progress and the labor market. A more hawkish tone—suggesting rates may stay higher for longer—would likely boost the dollar further, pushing EUR/USD below 1.1350. Conversely, a dovish surprise could trigger a short-term dollar selloff, allowing the euro to recover toward the 1.1450 resistance level.

Why this matters for traders

The 1.1350 level is not just a psychological round number; it represents a critical technical support that has held for several weeks. A decisive break below this level could signal a shift in the medium-term trend for EUR/USD, potentially leading to a test of the January low near 1.1200. For now, the pair remains in a tight range as market participants await the Fed’s verdict.

Conclusion

EUR/USD is trading in a holding pattern near 1.1350 as the dollar rally pauses ahead of the FOMC meeting. The Fed’s decision and Powell’s commentary will be the key drivers for the pair this week. A break below 1.1350 would be a bearish signal for the euro, while a dovish Fed could trigger a bounce toward 1.1450.

FAQs

Q1: What is the key support level for EUR/USD right now?
The key support level is 1.1350. A break below this level could lead to further losses toward 1.1200.

Q2: When is the next FOMC meeting?
The Federal Reserve’s two-day meeting begins on Tuesday, with the rate decision and press conference scheduled for Wednesday.

Q3: What would cause the euro to rally against the dollar?
A more dovish-than-expected tone from the Fed, suggesting potential rate cuts later this year, could weaken the dollar and allow the euro to rally toward the 1.1450 resistance level.