EUR/USD Could Retest 1.17 If the Fed Decision Sparks a Dollar Sell-Off, Citi Says

EUR/USD Could Retest 1.17 If the Fed Decision Sparks a Dollar Sell-Off, Citi Says

Published September 13, 2026 · Finance-Solutes.com Research Desk

EUR/USD could climb back toward its summer highs near 1.17. That’s the case if next week’s Fed decision triggers a “sell the news” reaction in the dollar, according to Citi strategists. Geopolitical and energy-market risks, however, could still limit how far the greenback actually falls.

The outlook comes as geopolitics and energy markets complicate the usual relationship between interest rate differentials and currency moves. Central banks are responding to an ongoing energy shock. At the same time, terms of trade are shifting across major economies. Together, these forces are pulling currencies in different directions at once.

Interest rate markets continue to price a higher terminal rate across major economies. Growth has stayed resilient despite the energy shock, and AI-linked global investment continues to support demand.

Investor takeaway: A “dovish hike” is the most likely Fed outcome next week. If traders read that decision as a chance to book profits on recent dollar strength, EUR/USD could push back toward 1.17. Still, persistent geopolitical risk and attractive US real rates argue for a more resilient dollar over six to twelve months.

The “Dovish Hike” Scenario

Citi views a dovish hike as the most probable result of next week’s Fed meeting. A move like this could pressure the dollar in the short term if traders respond by selling the currency once the decision is announced. Persistent geopolitical risk premiums and attractive US real interest rates could limit how much the dollar actually weakens. Those two forces support a more constructive dollar outlook over a six-to-twelve-month horizon than the near-term picture suggests.

Why the Euro’s Path Higher Isn’t Guaranteed

For the euro, recent European Central Bank policy shows how energy and geopolitical developments can complicate the usual link between interest rates and currency strength. A hawkish ECB on its own may not be enough to drive sustained euro gains while geopolitical concerns stay elevated. Rate differentials matter less than usual right now.

Key Technical Levels in EUR/USD

From a technical standpoint, EUR/USD has found support around 1.1575. That level marked the high following the post-“Liberation Day” rally. It has since acted as an important pivot within the pair’s roughly 1.14-to-1.18 range over the past year. Holding above 1.1575 keeps the near-term risk-reward balance tilted toward further upside, though geopolitical pressure could still cap the advance.

If markets treat the Fed decision as a chance to take profits on the dollar’s recent strength, EUR/USD could work its way back toward 1.17.

What this could mean for your portfolio:

• Short-term dollar weakness is plausible, not assured. A dovish hike narrative could pressure the dollar right after the decision, but it isn’t the base case for the medium term.
• Rate differentials alone won’t tell the full story. Read the Fed and ECB decisions alongside energy prices and geopolitical headlines, not in isolation.
• 1.1575 is the level to watch on EUR/USD. A clean break below it would undercut the near-term bullish case; holding above it keeps 1.17 in play.
• The six-to-twelve-month dollar view remains more constructive than the near-term one. Persistent risk premiums and real rate advantages still favor the greenback further out.

Disclaimer: This article is for informational and educational purposes only and does not constitute financial or investment advice. Currency markets can shift quickly around central bank decisions, and levels cited here should always be checked against live pricing before making any trading decision. For personalized guidance, Finance-Solutes.com’s free courses and expert advisors are available to help translate market analysis like this into a strategy that fits your own trading approach.

Source: Citi, via Investing.com — EUR/USD could retest 1.17 after Fed decision

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