EURUSD is consolidating right around an area of interest ahead of the FOMC decision, as traders await to see where the dollar is headed next. This pair has been trending lower and could be in for a continuation or reversal.

Price is testing the 38.2% Fibonacci retracement level that lines up with a falling trend line on the short-term time frame. A higher correction could reach the 50% Fib closer to a former support area around the 1.0300 handle.

The 61.8% Fib around the 200 SMA dynamic inflection point might be the line in the sand for a pullback, as a break above this would mark the start of a longer-term reversal from the downtrend.

The 100 SMA is still below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse. This could take EURUSD back down to the lows near parity or much lower.

Stochastic has a bit more room to climb before reaching the overbought zone to signal exhaustion among buyers, so the correction could go on for a while. RSI is already on the move down to suggest that sellers are taking over and could drag EURUSD back down.

The FOMC is widely expected to announce another large interest rate hike, possibly ranging from 0.75% to 1.00%, as they attempt to keep price pressures in check. Recall that the latest CPI figures turned out stronger than expected while retail sales came in strong, easing fears of a recession.

However, profit-taking could happen during the actual event if the Fed clarifies that this could be the last of their big rate hikes and that they could slow down their pace of tightening later on.

Keep in mind that the ECB is just starting its tightening cycle, although the central bank has been pretty cautious with its moves.