EUR/USD extends sharp decline for a third straight day, awaits Fed decision for new direction

EUR/USD continues its steep decline for the third consecutive session, shedding nearly 2.5% since Monday’s open, as a resurgent U.S. dollar weighs heavily on the euro.

The greenback’s strength is being driven by a highly favorable U.S.–EU trade agreement and stronger-than-expected U.S. economic growth in Q2, both of which have intensified pressure on the single currency.

Technically, the outlook for EUR/USD has deteriorated sharply. A break below trendline support, the confirmation of a bearish failure swing pattern, and a drop beneath the top of the ascending daily Ichimoku cloud (1.1485)—a level that has supported the broader uptrend since early March—have all produced strong bearish signals on the daily chart.

Further downside pressure is building across the broader timeframes. On the weekly chart, the pair is on course for its largest weekly loss since mid-September 2022 and is forming a bearish engulfing pattern. On the monthly chart, the euro is poised for its first loss in seven months.

A daily close below the broken Fibonacci support at 1.1537 (38.2% retracement of the 1.1065–1.1830 rally) is a minimum condition to keep bearish momentum intact. A break below 1.1447 (50% Fib retracement) would deepen the bearish structure and open the way toward 1.1357 (61.8% Fib / base of daily Ichimoku cloud).

Bearish momentum continues to strengthen, while the Tenkan/Kijun-sen bear cross adds to the negative short-term outlook.

Traders now turn their attention to the Federal Reserve’s policy decision later today. While markets broadly expect rates to remain unchanged, all eyes will be on Chair Jerome Powell’s tone and forward guidance.

Should the Fed maintain its hawkish bias, EUR/USD is likely to extend its downward spiral. Conversely, a more dovish tone could relieve some pressure on the euro and weigh on the dollar.

Res: 1.1485; 1.1537; 1.1572; 1.1623
Sup: 1.1447; 1.1371; 1.1357; 1.1245