The EUR/USD currency pair remains a focal point for forex traders as the 1.1600 level acts as a critical technical barrier in the current trading environment. Despite mild bearish pressure during Tuesday’s session, the euro-to-dollar exchange rate is still firmly within striking distance of this key resistance level. 

The outcome of this potential breakout hinges heavily on upcoming macroeconomic catalysts, most notably, the Federal Open Market Committee (FOMC) Statement. Alexandra Leto, a broker at Fletrade, offers a comprehensive breakdown of this topic in the article below.

Choppy Consolidation Below 1.1600

On Tuesday, the EUR/USD pair demonstrated range-bound behavior, trading slightly lower but staying within a well-defined consolidation zone. Market participants are carefully watching the 1.1600 level, which serves as a psychological and technical resistance zone. 

Historically, this level has acted as a pivot point, capping previous rallies and prompting price retracements. As long as EUR/USD remains below this threshold, choppy and indecisive price action is likely to persist.

Wednesday’s FOMC Statement: A Defining Catalyst

The June FOMC meeting is expected to play a pivotal role in determining the next major move in the EUR/USD pair. At present, traders are broadly pricing in the potential for two interest rate cuts by the Federal Reserve before the end of 2025, with the first likely to begin in September. 

Should the Fed’s statement hint at an easing cycle, it would likely put downward pressure on the U.S. dollar, thereby boosting the euro.

However, any indication of hawkish bias, whether through dot plot projections, economic outlook revisions, or Chair Powell’s commentary, could strengthen the dollar once again. This would likely send EUR/USD lower, reinforcing the significance of the 1.1600 level as a false breakout risk.

Technical Analysis: Key Levels in Focus

From a technical standpoint, EUR/USD is now compressing toward a major decision point. The pair continues to find intermittent support near the 1.1530–1.1550 zone, while resistance looms just overhead at 1.1600. A clean daily close above 1.1600 could signal the beginning of a bullish breakout, opening the door toward 1.1675, 1.1720, and potentially the 1.1800 handle over the medium term.

However, traders should exercise caution. A false breakout scenario, where price briefly moves above 1.1600 only to retrace and close back below, would trigger a bull trap, leading to a quick reversal and renewed selling pressure. This scenario is especially likely in thin liquidity conditions or if the FOMC delivers a surprise.

Momentum indicators such as the Relative Strength Index (RSI) and MACD are currently neutral to slightly bullish, suggesting that momentum is building but not yet confirmed. Volume profiles also indicate a cluster of previous trading activity around the 1.1570–1.1600 range, underscoring the importance of this supply zone.

Macro Forces and Risk Sentiment

Beyond technical levels and the FOMC, broader macroeconomic themes are shaping euro-dollar dynamics. In the eurozone, recent economic data such as PMI figures, industrial production, and inflation readings have been mixed. While core inflation remains sticky in some regions, growth prospects continue to lag, limiting the upside for the euro.

Conversely, the U.S. economy, while resilient, is showing signs of cooling in the labor market and moderation in core CPI, both of which support the Fed’s dovish lean. Any uptick in geopolitical tension, such as instability in Eastern Europe or escalating trade disputes, could also fuel safe-haven demand for the U.S. dollar, adding another layer of complexity to this trading setup.

Strategy Outlook: Patience Before Confirmation

Traders looking to capitalize on a potential EUR/USD breakout must remain disciplined. A confirmed daily close above 1.1600 would represent a technical confirmation of bullish momentum, potentially initiating a move toward higher resistance levels. Until such confirmation occurs, the risk of whipsaws and false signals remains high.

Short-term traders should remain nimble, using tight stop-loss orders and focusing on intraday levels such as 1.1570, 1.1530, and 1.1490 for key reaction points. Long-term investors might consider scaling into positions only after a sustained breakout with supporting volume and macro fundamentals.

Conclusion: All Eyes on the Fed

The EUR/USD pair is at a critical juncture, with the 1.1600 level serving as a potential launchpad for a bullish breakout or a ceiling that reinforces the range-bound structure. Traders should be prepared for significant volatility and exercise sound risk management practices.