The EUR/USD currency pair fell after the United States released weak economic data as the Federal Open Market Committee (FOMC) began its two-day policy meeting. The pair also declined due to rising tensions in the Middle East.
Retail sales in the US dropped 0.9% in May, following a 0.1% decline in April. This led to an annual retail sales growth rate of 3.3%, below the expected 5%. Industrial production fell by 0.2%, and export prices decreased by 0.9%, signaling possible negative economic growth this quarter.
The Federal Reserve started its meeting amid these disappointing figures. Economists expect the Fed to keep interest rates steady as it assesses the impact of tariffs on the economy. Recent data showing slower inflation growth increases the chance the Fed may adopt a dovish stance. Last week, consumer inflation rose from 2.3% to 2.4%, below the forecasted 2.5%.
The crisis escalation in the Middle East pushed crude oil prices higher. Analysts warn the conflict could continue for months, boosting demand for the US dollar, which is seen as a safe-haven currency.
The EUR/USD pair peaked at 1.1631 last week but has since dropped to around 1.1485. It broke below the key support level at 1.1573, part of a double-top pattern with a neckline at 1.1062. The pair remains above its 50-day and 100-day moving averages, while the Relative Strength Index (RSI) fell to 57 from a high of 66.35.
The likely scenario is further declines in the EUR/USD before and after the Fed decision. The next support level to watch is the psychological 1.1350 mark. A rise above 1.1631 would negate the bearish outlook.
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