The EURUSD rose after Fed Powell suggested easing policies, causing nearly 100% odds for a September rate cut. Two cuts are anticipated by the year’s end.
In technical terms, the spike exceeded the 100 and 200-hour moving averages at 1.1692 and 1.17128. Recent highs were 1.1714 and 1.17303, with targets set for 1.17874 and a high of 1.18289 reached on July 1.
Sellers Face Risk
Sellers face risk if the rate drops below 1.16924, suggesting a reversal. Previously, attempts by buyers above this area failed twice, but current Fed certainties encouraged renewed upward movement.
With the Federal Reserve signaling a clear shift toward easier policy, the path of least resistance for the U.S. dollar appears to be lower. Markets are now anticipating a rate cut in September with near certainty, putting direct upward pressure on the EUR/USD pair. This fundamental change from the central bank is the primary driver for our strategy in the coming weeks.
This policy pivot is supported by recent economic data that has become available this month in August 2025. The last Consumer Price Index report showed year-over-year inflation cooling to 2.6%, while the latest jobs report indicated a softening labor market as unemployment ticked up to 4.2%. These figures provide the justification for the Fed to begin its easing cycle.
In contrast, the European Central Bank appears to be holding firm, as core inflation in the Eurozone has remained more stubborn, recently reported at 2.9%. This growing divergence in monetary policy, where the Fed is cutting rates while the ECB stands pat, creates a strong tailwind for the euro against the dollar. We see this as the dominant theme for the rest of the third quarter.
Strategic Outlook
Given this outlook, we should consider strategies that profit from a rising EUR/USD, such as buying call options or establishing bull call spreads. The price has already broken key short-term moving averages, and the next significant target is the late July 2025 high of 1.1787. Clearing the highs from last week around 1.1730 would provide further confirmation of this upward momentum.
We must remember the failed attempts to break higher last week, making risk management essential. A move back below the 1.1692 level would signal that this breakout has lost steam and could be another false start. This price should be viewed as a critical support level for any bullish positions.
Looking back, we can draw parallels to the Fed’s easing cycle that began in mid-2019. During that period, the initial rate cuts led to a multi-month period of dollar weakness, which proved profitable for those positioned accordingly. The current environment is starting to echo that same pattern.
