Could EURUSD Crash After FOMC as ZEW Euro Sentiment Falls?

After falling two cents from its August peak, the EUR/USD pair has bounced back off the 1.10 level but we might see a big fall after the FOMC. As the FOMC meeting approaches, the pair moved higher yesterday, continuing its recovery. Last week, sellers were unable to push the price below the crucial 1.10 mark, where moving averages (MAs) provided strong support. On the daily chart, the price consolidated over several sessions, with the 50 SMA acting as a support zone. The significant bounce on Thursday from this level indicates robust buying pressure, turning the 1.10 level into a reliable support area.

ECB Interest Rate Cut and Market Reactions

The European Central Bank (ECB) lowered interest rates by 25 basis points last week in response to the deteriorating Eurozone economy. However, another rate cut is not expected until December. Yesterday, mixed comments from ECB policymakers hinted that upcoming economic data could influence their future monetary policy decisions. This uncertainty added some volatility to the pair but didn’t halt the EUR/USD from breaking above the 1.11 level yesterday.

EUR/USD Chart H4 – The 100 SMA Held As Support Above 1.10

Outlook for EUR/USD and FOMC Meeting

The pair closed above 1.11 yesterday, confirming expectations that the bullish trend will continue this week, with the next upside target set at 1.1200. While markets have already priced in a relatively dovish outcome from the upcoming Federal Reserve (FOMC) meeting, further bullish momentum may depend on the Fed’s response. If the Fed provides a dovish surprise, the EUR/USD could see additional gains. However, a hawkish surprise could lead to a reversal, causing the pair to drop from current levels.

Eurozone ZEW Economic Sentiment

• Eurozone ZEW economic sentiment 9.3 points vs 16.3 expected
• August ZEW sentiment was 17.9 points
• Germany September ZEW survey current conditions -84.5 points vs -80.0 points expected
• August current conditions were -77.3 points
• Economic sentiment 3.6 points vs 17.0 points expected
• Prior economic sentiment was 19.2 points

In September, German investor confidence took a hit, with sentiment worsening further for the month. This decline dampens hopes for an economic rebound. The ZEW institute reported a notable drop in economic expectations, with the majority of respondents already factoring in the European Central Bank’s policy direction into their forecasts.

EUR/USD Live Chart