EUR/USD: Powell is paving the way for monetary easing

The foreign exchange market was unrelenting on Friday, with the Euro/Dollar currency pair, holding steady, gaining momentum following the remarks made by Fed Chairman J. Powell at the Jackson Hole Symposium. Delivering a speech that was the center of attention at the closing of this major gathering of the world's leading financiers gathered in the idyllic setting of the eponymous valley in Wyoming, "Jay" Powell, without formally committing his institution, paved the way for monetary easing.

The United States is approaching the point where the Fed will have to lower interest rates to support employment, central bank Chairman Jerome Powell said on Friday, 22 August, in a highly anticipated speech, particularly by Donald Trump. A "rapid" deterioration in the US labor market cannot be ruled out and could "justify" an easing of monetary policy, and therefore interest rates, the head of the institution warned during the meetings in Jackson Hole, Wyoming (west).

He added that the Fed is in a "delicate situation" because the new tariffs implemented by the US executive are simultaneously beginning to affect prices paid by consumers, with the risk of rekindling inflation.

The Federal Reserve will conclude its next monetary policy meeting on 17 September. And the probability of a quarter-basis point cut in key interest rates is around 86%, according to data provided by the CME Group's FedWatch tool.

In the EU, currency traders have just learned of the IFO business climate index in Germany, the largest economy in the Eurozone. The index rose to 89 points, slightly above expectations. A recovery in the German economy, although it has the merit of confirming its strength, remains very fragile, according to Klaus Wohlrabe, Director of the Ifo.

Right now, the EUR/USD is trading at $1.1639.

KEY CHART ELEMENTS
The Euro/Dollar currency pair is in a marked upward trend, fundamentally above a meaningful oblique line. We have represented this linear support level in black. For the time being, we will keep a close eye on the relative positioning of the 20-day (dark blue) and 50-day (orange) moving averages to optimize entry points.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term view is positive on the Euro-Dollar (EURUSD) exchange rate.

Our entry point is at $1.1695. The price target for our bullish scenario is $1.2464. To preserve the invested capital, we recommend placing a protective stop loss at $1.1459.

The expected return on this forex strategy is 769 pips and the risk of loss is 236 pips.