Main Highlights:
- Event Focus: The Jackson Hole Economic Policy Symposium will be held from August 21 to 23, 2025, with Federal Reserve Chairman Jerome Powell scheduled to speak on Friday at 14:00 GMT.
- Rate Cut Expectations: The market anticipates an 83% chance of a 25 basis point rate cut on September 17, down from 94% last week.
- Dollar Impact: Lower interest rates typically weaken the dollar and boost risk assets like stocks and cryptocurrencies.
- Powell's Tone is Important: A dovish Powell could push the EUR/USD to break out; a hawkish tone might trigger profit-taking.
- EUR/USD Setup: The EUR/USD has risen 13% year-to-date, trading near 1.168, slightly below the key resistance level of 1.182.
- Neutral Technicals: A flat MACD and RSI at 50 reflect market indecision ahead of Powell's speech.
Macroeconomic Background
The Jackson Hole Symposium, hosted annually by the Kansas City Federal Reserve Bank of Wyoming, has become one of the most anticipated macroeconomic events of the year. Despite the gathering of global central bank governors, economists, and scholars, this year's market focus is on one individual: Federal Reserve Chairman Jerome Powell, who will speak at 14:00 GMT on Friday. The stakes are high. The Fed will announce its next rate decision on September 17, and investors are eager for forward guidance. Current U.S. rates stand at 4.5%, with an 83% chance of a cut to 4.25%. Just a week ago, this probability was as high as 94%, highlighting increased uncertainty. Why is this important for traders? Lower rates reduce the attractiveness of dollar savings and U.S. Treasury yields. This typically leads to capital flowing into higher-risk assets such as tech stocks, cryptocurrencies, and non-dollar currencies like the euro, yen, and franc. Conversely, higher rates strengthen the dollar and put pressure on stocks and commodities. In addition to interest rates, the Jackson Hole meeting may also address broader macro themes:
- Trade Policy: Ongoing tariff uncertainties involving Europe, Japan, and China
- Geopolitics: U.S.-Russia peace negotiations regarding Ukraine
- Labor Market: Weak employment conditions, with the latest non-farm payroll data showing a slowdown in hiring and rising unemployment rates
In recent years, the market has reacted strongly to Powell's comments:
- On August 26, 2022, Powell made hawkish remarks suggesting rate hikes. The dollar surged, and the S&P 500 faced a sell-off.
Source: TradingView
On August 23, 2024, Powell made dovish comments, leading to a stock market rally and a general decline in the dollar.
Given the current level of uncertainty, another significant move may occur this Friday.
Technical Analysis: EUR/USD
- The EUR/USD currency pair is a key barometer of dollar sentiment. When the dollar weakens, the EUR/USD ratio tends to rise, and vice versa. Year-to-date in 2025, the EUR/USD has risen 13%, supported by expectations of easing U.S. monetary policy and a more proactive fiscal stance in the Eurozone. Increased military investment across the EU, coupled with tariff-driven supply chain shifts, has also supported the euro. Currently, the pair is trading around 1.168, having peaked at 1.182 on July 1. The short-term outlook largely depends on Powell's tone: Dovish Scenario: A breakout above 1.182 could quickly target the psychological level of 1.2.
- If it breaks above 1.2, the next targets include the May 2021 high of 1.227 and the January 2021 peak of 1.235.
- Hawkish Scenario: If Powell suggests no immediate rate cuts, the dollar may strengthen.
- A drop below 1.16 could lead to a decline towards 1.14, which is a key support level from earlier this year.
Momentum indicators currently show no clear bias:
- The RSI is at 50, indicating a neutral stance, often seen as "the calm before the storm."
- The MACD is flat, with no crossovers or momentum divergences, confirming indecision.
For the RSI to reach overbought or oversold levels, the EUR/USD would need strong volatility, as the RSI is neutral at 50. On the daily chart, resistance is just above 70. Therefore, to return to that level, the EUR/USD will likely need to break above the resistance level of 1.182 from July 1. On the daily chart, a drop to an RSI of 30 is more pronounced, well below the level of 1.14. From a technical perspective, a decline could reach 1.10. This technical outlook aligns with the fundamental uncertainty, as traders are waiting for signals. Traders should also be aware of the following:
- Volatility Setup: Given the narrow technical range and known macro catalysts, the likelihood of a sharp breakout increases.
- Leverage Sensitivity: EUR/USD trading often involves leverage, meaning even small fluctuations can lead to high profits (or high risks), depending on position size.
- Profit-Taking Risk: A hawkish surprise could trigger widespread buying of the dollar and liquidate EUR/USD longs that profited earlier this year.
Source: TradingView
Jackson Hole Compared to Previous Years
What makes this year special is the divergence between data and market sentiment. Inflation is softening, and the labor market is cooling, which typically suggests a more accommodative policy. However, geopolitical risks and trade frictions are exacerbating inflationary pressures, and the Fed may be reluctant to cut rates too quickly. For this reason, Powell's policy guidance on Friday is crucial. Even subtle hints from the Fed regarding tariffs, unemployment rates, and/or global economic growth could influence rate expectations for the remainder of the year. The market currently divides into the following possibilities:
- Two rate cuts before the end of the year, bringing the Fed rate down to 4.0%
- Three rate cuts, with rates reaching 3.75% by 2025
- Only one rate cut if inflation and/or geopolitical tensions worsen
The more dovish Powell's remarks are, the greater the likelihood of a weaker dollar. However, if he emphasizes risks and patience, traders may flock back to the dollar.
Conclusion
The Jackson Hole Symposium is always significant, but this year it may have a decisive impact on the dollar and global markets. Traders should pay attention to:
- Powell's speech on Friday at 14:00 GMT
- EUR/USD breaking above 1.182 or below 1.16
- Changes in the probability of a rate cut in September
- Cross-asset reactions, especially in cryptocurrencies, stocks, and gold
As momentum indicators show neutrality, positions remain relatively low. However, once Powell speaks, volatility may increase significantly. Traders should prepare for range breakouts, dollar fluctuations, and price movements driven by news headlines, which could set the tone for the remainder of 2025.
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