EUR/USD: All eyes are on Jackson Hole

The EUR/USD trade is in a holding pattern as investors prepare for Jerome Powell's speech scheduled for this afternoon at the Jackson Hole Symposium. This annual meeting, closely followed by all markets, could provide valuable insights into the direction of the Federal Reserve's monetary policy.

The euro remains weakened after hitting its lowest level since 6 August, at $1.1583. The latest economic stats illustrate a contrasting situation between the two sides of the Atlantic. In the eurozone, the August PMI indices signaled expansion for the eighth consecutive month, driven by a sharp recovery in the manufacturing sector. In the United States, the PMIs also confirmed the strength of activity, but weekly jobless claims recorded their strongest increase in nearly three months, revealing underlying fragility in the labour market.

This dual signal fuels uncertainty about the Fed's intentions. Donald Trump is increasing political pressure by calling for a rapid and significant interest rate cut, arguing that current monetary policy is weighing on access to credit and slowing the economy. But inflation, still above the 2% target, is forcing Fed officials to play it safe. Nevertheless, markets are pricing in a nearly 65% probability of a 25 basis point cut in September, according to CME FedWatch data, down from over 85% last week.

Geopolitical tensions are adding an additional layer of complexity. The Russo-Ukrainian conflict remains without a clear outcome despite mediation attempts, and trade talks between the European Union and the United States are resulting in a strengthening of customs barriers, particularly in the automotive and semiconductor industries. These factors are weighing on the growth outlook for the old continent.

The markets are therefore awaiting Jerome Powell's speech at 16:00 (EU time). The tone adopted could determine the immediate movement of currencies. A message perceived as accommodative would boost the euro against the dollar, with the possibility of rallying to the $1.20 zone. Conversely, a more restrictive stance would weaken the European currency and break the medium-term oblique that still supports the upward trend.

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 $1.1594. 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 strategy is 406 pips and the risk of loss is 214 pips.