US Dollar and EUR/USD Outlook Amid Central Bank Decisions

The US Dollar Index (DXY) and the EUR/USD currency pair are facing significant volatility driven by upcoming central bank communications. Key drivers for DXY movements include shifts in US interest rate expectations, economic data surprises regarding inflation and employment, and changes in global risk sentiment.

For the EUR/USD pair, market analysts are monitoring two primary scenarios following a recent reversal candle. One possibility involves a rejection from the bearish Fair Value Gap (FVG) near 1.1220–1.1230, which could lead to a test of the previous week's low at 1.180. Alternatively, a stronger bearish structure could drive the price toward liquidity pools near 1.1110 or as low as 1.1060.

Significant volatility is expected this week due to the Federal Open Market Committee (FOMC) announcement and the European Central Bank (ECB) interest rate decision.