EUR/USD: Teasing range breakdown ahead of Powell speech

EUR/USD failed to close above 1.11 for the fourth straight day on Thursday and is currently teasing a downside break of the five-day trading range of 1.1115-1.1063.

As of writing, the pair is trading at 1.1068. A 4-hour close below 1.1063 would confirm a range breakdown. That would imply a resumption of the sell-off from recent highs near 1.1250 and open the doors for a drop below the psychological support of 1.10.

Focus on Powell's speech

Federal Reserve's (Fed) Chairman Jerome Powell will speak Friday morning at the Fed’s annual Jackson Hole symposium, an important gathering of central bankers and economists.

The financial markets are priced for a 25 basis point rate cut in September. At the same time, the markets are also expecting the European Central Bank (ECB) to deliver massive stimulus next month.

So far, the dovish ECB expectations have overshadowed the dovish Fed expectations. This is evident from the fact that the EUR/USD dropped by more than 180 pips over the last 2.5 weeks. Also, the Fed has been reluctant to signal aggressive rate cuts.

So, the greenback could take a beating if Powell bows down to political pressure by using the Jackson Hole speech to set the stage for aggressive easing in the near term. In that case, range breakdown in EUR/USD, if any, could be short-lived.

The common currency, however, will likely end up falling below 1.10 if Powell refrains from signaling additional easing, forcing markets to price out prospects of a September rate cut.

Ahead of Powell's speech (due at 14:00 GMT), the pair may also respond to comments by other Fed policymakers and the US housing data.

Technical levels