EUR/USD: A Broken Trendline Meets the Fed's Biggest Test Yet

[FXOpen]

EUR/USD sits near 1.1610, just off a one-month low, as tomorrow's Fed decision looms as the week's true catalyst. The ECB delivered its second hike of the year on September 10, lifting the deposit rate to 2.50% and warning that Middle East-driven inflation pressures will keep price growth well above target for an extended period. Lagarde called the move a "no-brainer", yet the euro barely reacted; the hike had been fully priced in, and markets are already pricing more ECB tightening than the central bank's own projections suggest is needed.

The real action lies across the Atlantic. Thursday's hotter-than-expected US CPI print pushed September Fed hike odds sharply higher, from 67% to 88% intraday, though the dollar has struggled to fully capitalise as falling oil prices pull Treasury yields back from three-year highs near 4.99%. Adding political noise, President Trump has reportedly pressed Fed Chair Kevin Warsh directly on rate cuts, a claim Trump himself has downplayed, just as the Fed enters its blackout period ahead of Tuesday's meeting.

The result: an ECB that has already delivered its hawkish surprise with muted market impact, against a Fed whose next move, and its independence from political pressure, could prove far more consequential for EUR/USD heading into Wednesday.

Technical Analysis of EUR/USD​

As the EUR/USD chart shows, the pair has recently broken below the ascending trendline that had guided the entire late-July recovery, a genuine shift in structure, and has now also lost the 200-period EMA and the 0.382 Fibonacci confluence near 1.1580, both of which had served as reliable support during the advance. Price is currently testing the 0.5 retracement near 1.1533, a key level in its own right.

Bullish Scenario

Should buyers reclaim the 0.5 support and stage a recovery, the first real test becomes the confluence of the 200-period EMA and the 0.382 retracement near 1.1580, now flipped into resistance. A confirmed break back above that zone would open the path towards retesting the broken ascending trendline, which itself converges near the last resistance on the chart.

Bearish Scenario

Conversely, a decisive break below the 0.5 retracement would confirm the bearish structure taking hold, exposing the 0.618 level near 1.1490, precisely where the broken descending trendline now sits as a potential resistance-turned-support test on the way down. A failure to hold there would risk a deeper slide towards the 0.786 retracement near 1.1430.

With price having just lost both its ascending trendline and the 200-period EMA in quick succession, EUR/USD's next move looks set to determine whether Wednesday's Fed decision accelerates this correction, or gives buyers a reason to defend the 0.5 support first.

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[Liam Walker]

Everyone is sweating over this trendline break like it's the end of the world, but honestly, it feels like the ultimate liquidity grab. You look at how hard everyone is piling into that bearish narrative, and it just makes me want to go long right here at 1.1530. The Fed is already baked into the price, and if they do anything less than hawkish, the short squeeze is going to be violent. Everyone is looking at the technicals, but I'm looking at how many shorts are going to be trapped when this thing snaps back. Good luck to the bears, you're going to need it.

 

[Noah Vance BR]

I wouldn't call it a sure thing, but the risk-reward on fading this breakdown is getting interesting. If we hold 1.1530, the R:R to target that 1.1580 level is decent, but honestly, chasing the breakout now feels like trying to catch a falling knife without a stop.

I'm staying flat until after the announcement. The probability of a total whipsaw with the Fed in play is too high for my liking; I'd rather miss the first hundred pips than get stopped out by a headline spike. Let the market show its hand, then trade the follow-through.

 

[JulianCraft]

long here? are you guys serious? inflation is still completely out of control and supply chains are a total mess. oil might be dipping a bit right now but that won't last. the fed has no choice but to keep leaning hard on rates, and if they actually blink because of political noise it's going to be even worse for the dollar long term anyway. no way i'm touching the buy side of this pair right now.

 

[Owen Carter 27]

I'm with you on the liquidity grab theory. Everyone is staring at that trendline like it’s a brick wall, but the wick rejection on the hourly at 1.1530 tells me the sellers are losing conviction. If we get a clean retest of that broken trendline from underneath and it fails to hold, that's when the real carnage starts. Personally, I'm waiting to see how the daily candle closes relative to that level before I commit, but the sentiment here is definitely getting too lopsided. Be careful out there.