During his speech at Jackson Hole, as reported by Reuters, the Fed Chair unexpectedly focused heavily on the US labour market. Powell stated that weaker employment prospects are unacceptable. As a result of this emphasis, market expectations for a rate cut in September decreased, and the value of the US dollar increased:
→ On Monday morning, the dollar index is recovering from the year’s lows, which were reached on Friday;
→ Accordingly, other currencies are depreciating against the USD.
As shown by the technical analysis of the EUR/USD chart:
→ Since April, the exchange rate fluctuations have been forming an upward channel (marked in blue, with support points indicated by circles);
→ Within this channel, the price is near the upper boundary, from which resistance can be expected;
→ Additionally, the 1.12 level shows signs of resistance—the price slightly exceeded it before quickly falling back below. Signs of false bullish breakouts indicate weak demand.
The possible exhaustion of buyers seems plausible, considering that:
→ The EUR/USD exchange rate increased by approximately 3.7% in August, surpassing the December 2023 high of around 1.114;
→ The RSI indicator is in the overbought zone, forming a bearish divergence.
Therefore, traders should be prepared for the price to follow a scenario involving a pullback after the rally to the 1.12 level. Volatile movements may occur following this week’s news releases:
→ The US GDP data is scheduled for release at 15:30 GMT+3 on Thursday;
→ The Eurozone inflation data is scheduled for release at 12:00 GMT+3 on Friday.
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