EUR/USD: Suspense in the forex market

The EUR/USD is once again the center of market attention, amid political tensions, monetary uncertainties, and key technical signals.

Against the backdrop, Donald Trump continues his verbal attacks on the Federal Reserve and its Chairman, Jerome Powell, accusing him of slowing the real estate market with rates deemed too high. This offensive comes on the eve of the annual Jackson Hole Symposium, a key meeting for central bankers. Powell's speech is eagerly awaited, with investors scrutinising any evidence that could confirm or deny expectations of a rate cut as early as September. Markets currently price in more than 80% of the probability of monetary easing, even though the Fed chief's caution regarding inflationary risks could come as a surprise.

On the European side, Lagarde was keen to put the impact of the trade agreement recently concluded between Washington and Brussels into perspective. While average tariffs are slightly above the ECB's assumptions, they remain far from the extreme scenario feared in the spring. For Frankfurt, this compromise doesn't call into question the basic trajectory of economic projections, which provides some support to the euro.

On the macroeconomic front, the dynamics remain mixed. In the United States, consumer inflation remains moderate, at around 2.8% on an annual basis, but producer and import prices signal potential future pressures. At the same time, the labour market is showing signs of slowing, even though the unemployment rate remains historically low. This situation perpetuates the Fed's dilemma between caution on inflation and the need to revive activity.

Internationally, another factor is attracting attention: the growing role of stablecoins in the demand for US debt. Treasury Secretary Scott Bessent believes that these digital assets backed by Treasury bonds could become a key channel for absorbing the increase in federal debt. The stablecoin market, still limited to around $255 billion, could, according to his projections, exceed $2 trillion in the coming years. This shift would mark a decisive step in the integration of the crypto sphere into traditional public financing channels. This information was reported by the Financial Times.

On a technical level, the EUR/USD pattern remains constructive. The European currency maintains a bullish bias as long as it remains above the strategic threshold of 1.14. The current consolidation sequence appears more like a breather in the trend than a reversal. In this context, traders can still consider the scenario of a gradual advance towards the 1.20 zone, a level that would constitute the next major target if the current momentum continues.

In short, the EUR/USD is at a crossroads between political decisions, monetary decisions, and financial innovations. Investors will have to navigate this range of uncertainties, while keeping in mind that, technically, the underlying trend remains favorable to the single currency.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term view is positive on the EUR/USD.

Our entry point is at $1.1646. The price target for our bullish scenario is $1.2000. To preserve the invested capital, we recommend placing a protective stop loss at $1.1380.

The expected return on this forex strategy is 354 pips and the risk of loss is 266 pips.