The EUR/USD pair is trading sideways ahead of Wednesday’s expected interest rate decision. With two Doji candles appearing in a row on the daily chart, let’s take a look at how to develop a strategy and trading plan before the event occurs.

A divided Fed looks for direction

Recent data have reinforced the view that the U.S. labor market continues to slow, supporting the possibility of another round of interest rate cuts. The market currently predicts that the probability of implementing an interest rate cut is about 85%. However, with utility inflation still above target, officials remain divided over the appropriateness of further easing.
This means the tone of a decision may be more important than the decision itself.
The number of dissenters on the committee, as well as the expected path of interest rates through 2026, are factors that will determine the direction of the dollar through the end of the year.
A cohesive message may calm uncertainty…while a disparate message may have the opposite effect.

Tight consolidation at high levels delineates movement boundaries

On the chart, it can be clearly seen that the EURUSD pair has paused.
Rising November lows have helped strengthen the recent recovery, pushing the pair back towards November highs. But the advance stalled below resistance, reflecting that the market is waiting for new information before taking definite action.
The last two trading days have formed a doji candle, indicating indecision and a lack of directional conviction.
This resulted in the formation of a narrow ascending consolidation area below resistance, which now defines the short-term trading range ahead of the Fed meeting.
This type of structure before important macro events is very useful for setting up breakout or breakout scenarios on lower time frames.
Following Wednesday’s announcement, a clear move above the small range for the first time could guide trading positions for the rest of the week.

Daily chart of the EUR/USD currency pair

Past performance is not a reliable indicator of future results
EUR/USD one-hour chart

Past performance is not a reliable indicator of future results

Disclaimer: This article is for educational purposes only. The information provided does not constitute investment advice and does not take into account any investor’s personal financial situation or objectives. Any information that may be provided regarding past performance is not a reliable indicator of future results or performance.

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