FUNDAMENTAL OVERVIEW USD:The US dollar rallied across the board on Wednesday following the FOMC decision as the market interpreted it as more hawkish than expected. The Fed hiked interest rates by 25 bps as widely expected in an unanimous decision. Moreover, the part saying that inflation remained elevated in part reflecting supply shocks was removed. The SEP showed an upward revision for growth and inflation, and downward revision for unemployment.The most important thing was the dot plot where the Fed projected just one more rate hike in 2026, with rates staying higher throughout 2027 before rate cuts coming in 2028. That was more dovish compared to market's pricing which saw one more rate hike in 2026 and two more in 2027. I think this shows that the Fed has low appetite for an extended tightening cycle, so it would just take a selloff in oil prices or deterioration in activity data to trigger a dovish repricing. Fed Chair Warsh mostly repeated his Jackson Hole speech.The market brought forward rate hike expectations for October, with the probability standing around 54% at the moment. I guess that's because Warsh mentioned that they want to see a timelier return to the 2% target.The focus is now on the Middle East and the economic data. We’ve already seen a significant easing in oil prices due to de-escalation hopes and improving supply conditions after Saudi Arabia restarted its exports. The US-Iran meeting yesterday was described as positive but no timeline for a resolution was given. Trump did mention, though, that another meeting was scheduled in the very near future. On the economic data side, keep in mind that when positioning and market expectations become stretched, even a modest shift in the data can trigger a significant reversal. If the US data starts surprising to the downside, expectations for aggressive rate hikes will likely be reduced and US dollar longs will get unwound.EUR:On the EUR side, the ECB delivered a 25 bps rate hike at the last meeting, taking the deposit rate to 2.50% as widely expected. The more hawkish takeaway came from the inflation outlook and the ECB's growing concern that the Middle East-driven energy shock could keep price pressures elevated for longer. The ECB now sees headline inflation at 3.0% in 2026 and 2.5% in 2027, with both the 2027 and 2028 inflation forecasts revised higher. The decision also came with a stronger growth assessment, with the ECB upgrading its 2026 and 2027 growth forecasts as the euro-area economy has proved more resilient than expected. This gives policymakers somewhat more room to keep tightening despite the inflation shock. The most important development came after the decision. ECB sources indicated that policymakers are already discussing another hike as early as the October meeting if energy prices remain elevated and inflation risks continue to broaden. Lagarde herself did not pre-commit to October though, stressing a data-dependent and meeting-by-meeting approach. Therefore, traders will keep focusing on the economic data and the Middle East situation.The first test will come today as we get the Flash PMIs for the major Eurozone economies. A downside surprise in the data might trigger a selloff in the short-term on a dovish repricing, but the focus will then shift to the US PMIs. If the US data disappoints, we could see the EUR/USD pair staging a bigger pullback after the recent drop. EURUSD TECHNICAL ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can see that EURUSDis approaching the major support zone around the 1.14 handle. If the price gets there, we can expect the buyers to step in with a defined risk below the support to position for a rally back into the 1.1560 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.EURUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we have a downward trendline defining the bearish momentum. If we get a pullback, the sellers will likely lean on the trendline with a defined risk above it to keep targeting new lows. The buyers, on the other hand, will look for a break higher to pile in for a rally into the 1.1560 resistance, with the 1.1495 swing high as the first target. EURUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, there’s not much we can add here as the sellers will have a better risk to reward setup around the downward trendline, while the buyers will need a break above it to open the door for new highs. The red lines define the average daily range for today.UPCOMING CATALYSTSToday, we get the Flash Eurozone and US PMIs, while tomorrow we have the Trump-Xi meeting. This article was written by Giuseppe Dellamotta at investinglive.com.