This week saw the EURUSD pair decrease as traders adopted a defensive stance ahead of Powell’s speech. The USD began the week positively, influenced by concerns of a hawkish Powell, whilst equities saw some decline, possibly due to profit-taking and hedging before the Jackson Hole event.
No recent data justifies a pre-commitment to a rate cut in September, with improving Jobless Claims and rising inflation figures signalling caution. Market speculations have adjusted to price around 52 bps of easing by the year’s end. The EUR side remains unchanged post-US-EU trade deal, with tariffs set at 15%. Many ECB members maintain a neutral rate cut stance unless negative data emerges, with the market pricing 10 bps of easing by year-end appearing unrealistic given recent PMIs.
Technical Analysis
On the daily chart, EURUSD trades between a major trendline at 1.1750 and key support at 1.1572, suggesting neither strong buying nor selling signals. On the 4-hour chart, a minor downward trendline suggests continued bearish momentum, with sellers targeting around the 1.16 support and buyers eyeing a rally if the trendline breaks. The 1-hour chart aligns with these trends, emphasizing current trading ranges. Upcoming catalysts include US Jobless Claims figures and US Flash PMIs, with Powell’s Jackson Hole speech concluding the week’s trading events.
We are seeing the US dollar find support as traders position defensively for what Fed Chair Powell might say at Jackson Hole. This caution is evident in the EUR/USD pair, which has been edging lower all week. Many are reducing risk and hedging portfolios, anticipating that a hawkish tone from the Fed is a real possibility.
The data supports this defensive view, with recent US initial jobless claims holding strong at a low 215,000 and the last CPI report showing inflation remains sticky at 3.4%. This gives the Fed very little reason to pre-commit to a rate cut, which is why we’ve seen the market scale back its bets to about two rate cuts by year-end. A strong dollar seems like the path of least resistance until we hear otherwise.
Eurozone Economy
On the other side of the pair, the Eurozone economy looks much weaker, with the recent flash manufacturing PMI data for the bloc falling to 45.8, signaling a deepening contraction. This economic softness makes the market’s pricing of just a single 10 basis point cut from the ECB seem optimistic. This divergence is even more important when we remember the 15% tariffs that were set in the US-EU trade deal back in early 2025.
From a technical standpoint, EUR/USD is trading between a major trendline near 1.1750 and a key support level around 1.1572. For derivative traders using futures, this means the most logical approach is to consider short positions if the price rallies towards that 1.1750 resistance. The risk-to-reward is simply better there for sellers.
Given the uncertainty of the speech, buying put options on the Euro offers a clear, risk-defined way to position for a hawkish surprise from Powell. We saw how important this event can be when looking back at the sharp market reaction following Powell’s hawkish Jackson Hole speech in 2022. Traders expecting a big move but unsure of the direction might also consider volatility strategies.
For now, the minor downward trendline on the four-hour chart is the key guide for short-term momentum. Sellers will likely use any move towards that line as an opportunity to add to bearish positions. A drop to the minor support around the 1.1600 level seems probable before we get more clarity tomorrow.
