EUR/USD drops to one-month lows under 1.0400 ahead of FOMC statement

• Euro under pressure after ECB emergency meeting.
• US dollar mixed ahead of the Fed’s decision.
• FOMC statement to be released at 18:00 GMT.

The EUR/USD is falling on Wednesday, trading at daily lows near 1.0380 ahead of the Fed’s decision. The US dollar is posting mixed results while the euro is falling across the board weakened after the European Central Bank emergency meeting.

Eyes on the Fed

In a few minutes, at 18:00 GMT the Fed will announce its decision. A rate hike is expected. Analysts consider the central bank could raise interest rates by 50 or 75bps. The decision, the statement and the staff macroeconomic projections will likely trigger sharp moves across financial markets.

The US dollar is mixed ahead of the meeting. The DXY is hovering around 105.50, up 0.05%. US yields are modestly lower on Wednesday, with the 10-year yield at 3.38%.

The euro is among the worst-performing currencies weakened after an emergent meeting from the European Central Bank. The Governing Council discussed policies to address widening spreads. The ECB said it will use PEPP reinvestments with flexibility and that it is working on an “anti-fragmentation” instrument. “We do not think today’s message will be enough to soothe markets and expect further volatility and higher spreads ahead”, say Jan von Gerich, Chief Analyst at Nordea Research.

The EUR/USD awaits the outcome of the two-day Fed meeting trading at daily lows and looking at the May bottom of 1.0345/50. The mentioned area is a key support that if broken could open the doors to 1.0300 and below. Also, the area could trigger a rebound. Resistance levels might be located at 1.0420 and then 1.0490/1.0500.

Technical levels