Speaking at the Jackson Hole symposium last Friday, Fed Chairman Jerome Powell admitted that monetary policy could be adjusted if the labor market weakens. Investors welcomed these comments, pushing alternative assets higher. However, remarks from other Fed members that followed were cautious, reducing market hopes for imminent easing. St. Louis Fed President Alberto Musalem and New York Fed President John Williams noted that any decision on interest rates will depend on incoming economic data, suggesting the Fed may keep its current stance in September if inflation pressures persist. Tomorrow at 14:30 (GMT+2), July Personal Consumption Expenditures (PCE) data will be released. If the index rises, similar to the July core CPI which hit 3.1% YoY, the chances of a September rate cut will drop significantly. Still, political factors could play a role: if President Donald Trump succeeds in replacing enough Fed board members with his allies, rates might be lowered — though such moves could carry negative long-term consequences for the U.S. economy.
In contrast, the European Central Bank’s (ECB) policy appears clearer to investors. Since mid-last year, the regulator has steadily lowered borrowing costs, stabilizing inflation at the 2.0% target in July and maintaining moderate growth (GDP up 0.1% QoQ and 1.4% YoY in Q2). In this environment, officials are likely to pause and possibly return to dovish rhetoric in December if the economy slows under the weight of U.S. tariffs.
Support and Resistance Levels
The pair trades in a sideways channel of 1.1719–1.1597 (Murray levels [8/8]–[6/8]) and has yet to break out. A move above the upper boundary would open the way to 1.1841 (Murray level [+2/8]) and 1.1963 (Murray level [+2/8], W1). A breakdown below the lower boundary would trigger a decline toward 1.1475 (Murray level [4/8]) and 1.1353 (Murray level [2/8]).
Technical indicators remain mixed: Bollinger Bands are flat, MACD is near the zero line with low volumes, and the Stochastic is turning upward.
Resistance levels: 1.1719, 1.1841, 1.1963.
Support levels: 1.1597, 1.1475, 1.1353.
Trading Scenarios Forecast
Long positions may be opened above 1.1719, with targets at 1.1841 and 1.1963, stop-loss at 1.1640. Implementation horizon: 5–7 days.
Short positions may be opened below 1.1597, with targets at 1.1475 and 1.1353, stop-loss at 1.1680.
Scenario
Timeframe: Weekly Forecast
Recommendation: BUY STOP
Entry Point: 1.1720
Take Profit: 1.1841, 1.1963
Stop Loss: 1.1640
Key Levels: 1.1353, 1.1475, 1.1597, 1.1719, 1.1841, 1.1963
Alternative Scenario
Recommendation: SELL STOP
Entry Point: 1.1595
Take Profit: 1.1475, 1.1353
Stop Loss: 1.1680
Key Levels: 1.1353, 1.1475, 1.1597, 1.1719, 1.1841, 1.1963