EURUSD Slides Below 1.0850 as Fed Rate Decision Looms — July 21 Trading Plan

EURUSD Falls to 1.0845 as Fed Meeting Takes Center Stage

EURUSD traded at 1.0845 during the Asian session on July 21, 2026, down 0.3% from the previous close. The pair has been trending lower since the start of the week, as traders reduce risk ahead of the Federal Reserve's policy announcement scheduled for 14:00 ET. The market is pricing in a 25-basis-point rate hike, but the focus will be on the dot plot and Chair Powell's tone regarding future tightening.

The euro zone economic calendar is light today, leaving the pair at the mercy of USD dynamics. German producer prices for June came in slightly below expectations, adding to the euro's weakness. Meanwhile, US Treasury yields edged higher, with the 10-year note yielding 4.12%, providing additional support for the dollar.

Three Forces Driving EURUSD Lower Today

Hawkish Fed Expectations Bolster the Dollar

The primary driver of EURUSD's decline is the anticipation of a hawkish message from the Fed. Market participants expect the central bank to signal that rates will stay higher for longer to combat persistent inflation. This has pushed the US dollar index to fresh highs, weighing on the euro. Any deviation from this expected hawkishness could trigger a sharp reversal in EURUSD.

Euro Zone Economic Data Disappoints

German PPI for June rose 0.1% month-on-month, missing the consensus estimate of 0.3%. This suggests that inflationary pressures in the euro zone's largest economy are easing, which could reduce the urgency for the European Central Bank to continue hiking rates. The data reinforces the view that the ECB may pause in September, widening the policy divergence with the Fed.

Technical Resistance Holds at 1.0900

From a technical perspective, EURUSD failed to break above the 1.0900 resistance level on Monday, which acted as a ceiling. The pair then reversed sharply, breaking below the 50-day moving average near 1.0860. The Relative Strength Index on the 4-hour chart has dipped below 40, indicating bearish momentum. Traders are now watching the 1.0800 support level, a break of which could accelerate selling towards 1.0750.

Key Levels and Assets to Watch After the Fed Decision

For intraday traders, the immediate focus is on the 1.0800–1.0900 range. A break below 1.0800 could target the June low at 1.0750, while a rebound above 1.0900 might challenge the 1.0950 resistance. The outcome of the Fed meeting will likely dictate the direction for the rest of the week. Additionally, the euro's correlation with risk sentiment means that any volatility in equity markets could spill over into EURUSD. The VIX index is currently at 18, suggesting moderate risk aversion.

Traders should also monitor the EUR/GBP cross, which has been range-bound near 0.8600. A breakout in either direction could provide clues about euro sentiment independent of the dollar. The broker choice matters for tight spreads during high-impact events like the Fed decision.

What the Fed Decision Means for EURUSD Traders

The Fed's decision is a binary event that could trigger significant volatility in EURUSD. If the Fed delivers a hawkish surprise—such as a 50-basis-point hike or a higher terminal rate projection—the dollar could rally sharply, pushing EURUSD below 1.0800. Conversely, a dovish hold or a signal that rates are near their peak could spark a euro rally towards 1.1000.

Traders should be cautious about holding positions through the announcement, as spreads can widen and slippage may occur. It's often prudent to wait for the initial volatility to subside and then trade the follow-through. For those who prefer to avoid event risk, focusing on trading signals after the release can be a safer approach. Beginners can learn more about event-driven trading in the VNIX classroom.

Regardless of the outcome, the key is to have a clear plan: define your risk per trade, set stop-losses, and avoid overtrading. The market will likely remain volatile in the hours following the decision, so patience and discipline are paramount.