EUR/USD Technical: Euro bullish trend intact despite 1.2% sell-off after FOMC

[Ben Graham]

The euro has continued to rally against the greenback from the 1 August 2025 low of 1.1392 and broke above its recent 52-week high of 1.1830 printed on 1 July 2025, within its medium-term uptrend phase in place since 13 January 2025

The EUR/USD hit a 4-year high of 1.1919 on Wednesday, 17 September, at the onset of the FOMC announcement of a 25 basis points (bps) interest rate cut to bring down the Fed funds rate to 4.00%-4.25%, and the release of the latest summary of economic projections (dot plot) that indicates two more projected interest rate cuts of 25 bps each before 2025 ends.

Post FOMC sell-off due to a less “dovish” Fed Chair Powell’s press conference

Thereafter, the EUR/USD erased all its early intraday gains and closed lower by -0.5% at the end of Wednesday, 17 September 2025, US session due to a less “dovish” Fed Chair Powell’s press conference.

Powell described the latest policy move as a “risk management” cut, emphasising that the Fed will remain data-dependent and proceed “meeting by meeting.” This stance reduced expectations of a deeper, new cycle of monetary policy easing.

The EUR/USD extended its decline in today’s Asia session, hitting a low of 1.1780, a drop of 1.2% from yesterday’s post-FOMC high of 1.1919.

The Fed funds futures market is still implying three interest rate cuts in 2026

Fig. 1: Aggregated FOMC meeting probabilities on Fed funds rate as of 18 Sep 2025 (Source: CME FedWatch tool)

Despite Fed Chair Powell’s “meeting by meeting” rhetoric and the latest updated dot plot projections that show only a 25-bps cut in 2026, market participants in the Fed funds futures market are still expecting at least three interest rate cuts of 25 bps each in 2025 to bring the Fed funds rate to 2.75%-3.00% in 2026, according to the latest data from the CME FedWatch tool (see Fig. 1).

A continuation of dovish expectations implied by the Fed funds futures market is likely to cap the strength of the US dollar, in turn, creating a positive feedback loop back into the EUR/USD.

Let’s now examine the latest short-term (1 to 3 days) trajectory and key technical levels to watch on the EUR/USD.

Fig. 2: EUR/USD minor trend as of 18 Sep 2025 (Source: TradingView)

Preferred trend bias (1-3 days)

• The current decline of 1.2% seen in the EUR/USD from its post-FOMC high of 1.1919 is likely a minor corrective decline within its ongoing minor uptrend phase in place since the 1 August 2025 low of 1.1392.
• Bullish bias on the EUR/USD above 1.1790/1.1770 key short-term pivotal support, and a break above 1.1860 sees a retest on 1.1910 before the next intermediate resistance comes in at 1.1970/1.2000 (Fibonacci extension and the upper boundary of the minor ascending channel) (see Fig. 2).

Key elements

• The EUR/USD has shaped an hourly bullish reversal candlestick at the 1.1790/1.1770 key short-term support.
• The hourly RSI momentum indicator has staged a bullish breakout from its parallel descending resistance after it hit its oversold level in today’s Asian session. These observations indicate a short-term bullish momentum revival for the EUR/USD.
• The yield spread between the 2-year German Bund and the US Treasury note has continued to trend higher (narrowing) from -1.63% on 16 September to -1.54% at the time of writing.
• This development indicates a relative decline in the yield attractiveness of the 2-year US Treasury versus its German counterpart, which in turn exerts downside pressure on the US dollar against the euro.

Alternative trend bias (1 to 3 days)

A break below the 1.1770 key short-term support invalidates the bullish scenario on the EUR/USD to see a deeper minor corrective decline to expose the next intermediate supports at 1.1700 (also the 20-day moving average) and 1.1675 (also the 50-day moving average).

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