This week, the EURUSD pair fell as traders took a cautious approach ahead of Powell’s upcoming speech. The USD started the week on a strong note due to worries about Powell’s hawkish stance. At the same time, equities dipped a bit, possibly because of profit-taking and hedging before the Jackson Hole event. Recent data does not support a commitment to a rate cut for September. Improving Jobless Claims and rising inflation suggest caution. Market expectations have settled at about 52 basis points of easing by the end of the year. The EUR side remains steady after the US-EU trade deal, which has set tariffs at 15%. Many ECB members are holding a neutral stance on rate cuts, waiting for negative data. The market’s expectation of a 10 basis point easing by year-end seems unrealistic given the latest PMIs.

Technical Analysis

On the daily chart, the EURUSD trades between a major trendline at 1.1750 and key support at 1.1572. This suggests there are no strong buying or selling signals. The 4-hour chart shows a minor downward trendline, hinting at ongoing bearish momentum. Sellers are targeting around the 1.16 support level, while buyers will look for a rally if the trendline breaks. The 1-hour chart supports these trends, highlighting the current trading ranges. Upcoming events include US Jobless Claims figures and US Flash PMIs, with Powell’s Jackson Hole speech wrapping up the week’s trading. The US dollar is finding support as traders prepare for Powell’s remarks at Jackson Hole. This caution is reflected in the EUR/USD pair, which has been declining all week. Many traders are reducing risk and hedging portfolios, expecting a hawkish stance from the Fed. The data reinforces this cautious outlook. Recent initial jobless claims in the US are low at 215,000, and the last CPI report reveals inflation is sticky at 3.4%. This leaves the Fed little reason to commit to a rate cut, leading the market to scale back expectations to about two rate cuts by year-end. A strong dollar appears to be the likely trend unless we hear otherwise.

Eurozone Economy

In contrast, the Eurozone economy appears weaker. Recent flash manufacturing PMI data fell to 45.8, indicating a deeper contraction. This weakness makes the market’s expectation of just one 10 basis point cut from the ECB seem overly optimistic. This situation is especially significant given the 15% tariffs set in the US-EU trade deal from early 2025. From a technical view, EUR/USD is trading between a major trendline near 1.1750 and a key support level around 1.1572. For traders using futures, the logical strategy is to consider short positions if the price approaches the 1.1750 resistance level. The risk-to-reward ratio favors sellers at this point. Considering the uncertainty around the speech, buying put options on the Euro provides a clear and defined way to prepare for a hawkish surprise from Powell. The market’s strong reaction to Powell’s hawkish speech at Jackson Hole in 2022 underscores the significance of this event. Traders expecting a considerable move but unsure of the direction might also explore volatility strategies. For now, the downward trendline on the four-hour chart is crucial for short-term momentum. Sellers are likely to use any approach to that trendline as a chance to add to bearish positions. A drop toward the minor support around the 1.1600 level appears likely before we gain more clarity tomorrow. Create your live VT Markets account and start trading now.

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