EUR/USD Nears Breakout Above 1.1880 as Markets Await Fed Decision

EUR/USD is edging toward a breakout after consolidating in recent sessions. On the upside, resistance sits at 1.1878, the 2025 ceiling reached on September 16. A sustained push above this mark could open the door to the September 2021 peak at 1.1909, with the psychological 1.2000 barrier looming as the next major target.

On the downside, initial support rests at the 100-day Simple Moving Average (SMA) near 1.1551. Below that, the August low at 1.1391 and the May 29 floor at 1.1210 offer additional safety nets for the pair.

Momentum indicators show a mixed picture. The Relative Strength Index (RSI) has climbed toward 65, suggesting buyers retain the upper hand. However, the Average Directional Index (ADX) lingers near 14, pointing to a trend that lacks firm conviction.

Euro Gains While Dollar Slips

The euro extended its advance on Tuesday, lifting EUR/USD to fresh 2025 highs around 1.1880. Meanwhile, the U.S. dollar weakened further, with the Dollar Index (DXY) sliding below 97.00, its lowest level in nearly three years.

Trade Policy: Tensions Ease but Tariffs Persist

Global trade sentiment improved slightly after Washington and Beijing agreed to extend their tariff truce for another 90 days. The United States postponed planned tariff hikes until November 10, while China refrained from immediate retaliation. Nonetheless, tariffs remain steep, with U.S. imports from China facing a 30% duty and Chinese exports to the U.S. taxed at 10%.

At the same time, Washington secured a new trade agreement with Brussels. The European Union agreed to lower tariffs on U.S. industrial goods and expand market access for American agriculture and fisheries. In exchange, the U.S. imposed a 15% tariff on most European imports. Car tariffs remain under consideration, pending upcoming EU legislation.

Fed Poised for September Rate Cut

The spotlight now shifts to the Federal Reserve, which is widely expected to deliver a 25-basis-point rate cut at its Wednesday meeting. Markets will focus not only on the rate decision itself but also on the updated “dot plot,” offering insight into policymakers’ expectations for future cuts over the coming months.

ECB Maintains Steady Policy

Meanwhile, the European Central Bank opted to keep its three key interest rates unchanged last week. Officials noted that inflation is now broadly aligned with the medium-term 2% target. Core inflation is projected to average 2.4% in 2025 before easing to 1.9% in 2026 and 1.8% in 2027.

ECB President Christine Lagarde emphasized that policy will remain data-driven and decided on a meeting-by-meeting basis. She described the eurozone outlook as more balanced, remarking that the Bank is in a “good place” as risks to growth and inflation appear more even.

What’s Next for EUR/USD?

With the euro riding a wave of optimism and the dollar under pressure from expected Fed easing, EUR/USD looks primed to test higher levels. Still, a clear breakout above 1.1900 will likely require a fresh catalyst, whether from U.S. data releases, Fed guidance, or further developments in global trade policy. Until then, traders will continue to monitor momentum signals and key technical levels as the pair edges closer to a decisive move.