EUR/USD approaches multi-year lows near 0.9850 ahead of the FOMC decision

• Another leg lower in EUR/USD brings price near multi-year lows.
• Euro remains under pressure as traders await Fed’s decision.
• FOMC meeting set to trigger volatility across financial markets.

The EUR/USD dropped further during the American session and bottomed at 0.9865, the lowest level in two weeks, and just one pip above the YTD low. The pair remains near the lows as traders await the FOMC decision.

First Russian, then the dollar… now the Fed?

The euro was already hit by rising geopolitical tensions. Russian President Vladimir Putin announced earlier on Wednesday a partial mobilization to support the Ukraine war.

Despite the cautious tone among investors, yields in Europe and in the US kept rising. The US 10-year yield stands at 3.56% while the 2-year yield rose above 4.00% for the first time since 2007. In Germany, the 5 and 30-year curve inverted for the first time since 2008.

Economic data released on Wednesday showed a decline in US Existing Home Sales in August for the seventh month in a row. The 0.4% slide pushed the annual rate to 4.7 million, better-than-expectations of a 4.8 million reading.

Despite Putin and US data, attention is set on the FOMC that in a few minutes, at 18:00 GMT will announce its decision on monetary policy. The Fed will also release new macroeconomic projections from the FOMC staff and Chairman Powell will held a press conference.

The decision, the tone, the dot plot and Powell’s words are expected to have a significant impact on financial markets including the US dollar. The DXY arrives to the meeting trading at the strongest level since June 2002, above around 111.00.

Technical levels