The EUR/USD pair has posted gains for three consecutive days this week and remains firmly above the psychological 1.1600 level. However, bulls remain cautious and are reluctant to take aggressive long positions ahead of the outcome of the two-day FOMC meeting.

Optimism surrounding a potential peace agreement between the United States and Iran, which has yet to be formally signed, continues to keep the US dollar under pressure. This, in turn, serves as a key factor supporting the EUR/USD pair.

The euro is receiving additional support from the European Central Bank's hawkish signal after it raised interest rates for the first time in three years. Moreover, the ECB significantly revised its 2026 inflation forecast upward to 3% amid ongoing energy-related challenges and increasing price pressures across the euro area. Market participants are also pricing in approximately 40 basis points of additional ECB rate hikes in 2026 despite easing tensions in the Middle East.

The United States and Iran have reached a preliminary peace agreement aimed at ending the conflict that began in early 2026. The preliminary memorandum of understanding provides for a 60-day ceasefire and the reopening of the Strait of Hormuz, laying the groundwork for technical negotiations regarding Iran's nuclear program. However, details of the agreement remain limited.

These factors, together with expectations that the US Federal Reserve may raise interest rates by 25 basis points in December, are preventing bears from aggressively selling the US dollar and are therefore limiting the upward potential of EUR/USD. Consequently, market participants should focus on the Federal Reserve's monetary policy decision, the latest economic projections, and the updated dot plot. Comments from the new Federal Reserve Chair, Kevin Warsh, during the post-meeting press conference will also be closely scrutinized for signals regarding the future direction of monetary policy.

From a technical perspective, the pair has managed to move above the 20-day SMA, although confidence in further gains remains limited ahead of the Federal Reserve's interest rate decision. In addition, oscillators have not yet moved into positive territory, indicating that bears still hold an advantage. Immediate resistance is located in the 1.1626–1.1635 level, where the 50-day EMA is positioned. Beyond that, bulls will face a key resistance area around 1.1677, where the 50-day, 100-day, and 200-day SMAs converge. A sustained move above this zone would provide stronger confirmation of further upward potential.

Support is provided by the psychological 1.1600 level, the convergence of the 9-day and 14-day EMAs, and the 1.1575 level. Failure to hold above these support levels could accelerate the decline toward the psychological 1.1500 level, or the June low.