EUR/USD: Teasing range breakdown ahead of Powell speech

EUR/USD has been restricted to a narrow range of 1.1115-1.1063 since last Friday.
The pair is currently probing the lower edge of the trading range.
A range breakdown, if any, could trap sellers on the wrong side of the market if Fed's Powell sounds dovish.

Omkar Godbole FXStreet Contributor

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

EUR/USD

Overview
Today last price	1.1068
Today Daily Change	-0.0014
Today Daily Change %	-0.13
Today daily open	1.1082

Trends
Daily SMA20	1.1137
Daily SMA50	1.1211
Daily SMA100	1.1215
Daily SMA200	1.1287

Levels
Previous Daily High	1.1114
Previous Daily Low	1.1064
Previous Weekly High	1.1232
Previous Weekly Low	1.1066
Previous Monthly High	1.1373
Previous Monthly Low	1.106
Daily Fibonacci 38.2%	1.1083
Daily Fibonacci 61.8%	1.1094
Daily Pivot Point S1	1.1059
Daily Pivot Point S2	1.1036
Daily Pivot Point S3	1.1009
Daily Pivot Point R1	1.1109
Daily Pivot Point R2	1.1136
Daily Pivot Point R3	1.1159

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.