EUR/USD Regains Strength as Powell’s Jackson Hole Speech Triggers USD Decline

The US Dollar (USD) initially strengthened last week but lost momentum on Friday after Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole Economic Symposium. The shift in sentiment allowed the EUR/USD pair to rebound strongly, closing the week above 1.1700 after briefly dipping to 1.1583.

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EUR/USD Technical Outlook

At the time of writing, EUR/USD trades near 1.1702, though the broader technical picture still signals caution:

• The Relative Strength Index (RSI) on the 4-hour chart remains below 40, reflecting persistent bearish undertones.
• The pair is positioned under both the 100-period and 200-period Simple Moving Averages (SMAs), further highlighting downside risks.

Key Support Levels:

• 1.1540 (static support)
• 1.1500 (psychological round figure)
• 1.1450 (long-term support)

Key Resistance Levels:

• 1.1625 (100-period SMA)
• 1.1645 (200-period SMA)
• 1.1700 (round figure and static resistance)

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Market Fundamentals – Jackson Hole in Focus

The Euro came under pressure earlier in the week, but Powell’s softer-than-expected tone shifted momentum back in favor of the common currency. His comments pointed to rising downside risks in the labor market while acknowledging that tariffs continue to pose inflationary challenges.

US Economic Signals

• PMI Data: The preliminary S&P Global Composite PMI rose to 55.4 in August (from 55.1 in July), showing private sector activity remained in expansion mode.
• Inflationary Signals: Chris Williamson, Chief Economist at S&P Global Market Intelligence, noted that higher selling prices suggest US inflation may rise further above the Fed’s 2% target.

This combination of strong activity but rising price pressures complicated expectations, leading traders to adjust their Fed bets.

According to the CME FedWatch Tool, the probability of a 25 bps rate cut in September slipped to 73% after the PMI release, down from 84%.

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Jackson Hole Speech Impact

Powell’s address at Jackson Hole clarified that:

• The Fed will adopt a more flexible approach to inflation targeting.
• Risks to employment are growing, but inflation pressures remain a concern.
• Policymakers will remain cautious, but a September cut is still on the table.

This dovish-leaning stance triggered a sharp sell-off in the US Dollar, enabling EUR/USD to surge back above the 1.1700 level into the weekly close.

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EUR/USD Outlook – What’s Next?

Looking ahead, traders will closely monitor:

• Germany’s GDP report due later Friday.
• Upcoming Eurozone PMI data, which could provide fresh momentum for the Euro.
• Any additional Fed commentary following Powell’s Jackson Hole remarks.

For now, the bias remains cautiously bullish for EUR/USD, with strong support holding near 1.1540 and upside potential if the pair sustains above 1.1700.

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