25.08.202604:05 Forex Analysis & Reviews: EUR/USD Review. August 25. Kevin Warsh's Speech – The Key Event of the Week

The EUR/USD currency pair showed no interesting movements on Monday. At the end of last week, the European currency began a correction, which may continue this week. Overall, the last upward movement totaled exactly 400 points, so a technical correction is certainly justified. Please note that the correction may take some time. For example, the last correction visible on the 4-hour timeframe lasted almost two weeks. Therefore, traders should be prepared for a relatively prolonged decline in the pair, which will serve as a correction.

Previously, we often published articles titled "Weekly Preview," but we believe they are unnecessary under the current circumstances. This is because the prospects for a given currency pair now depend on several key themes, which we discuss almost daily. Macroeconomics no longer constitutes one of these themes. The market is prepared to consider and react to only the most significant reports, which number only a few each month. There will be none this week. The most important are: inflation, labor market conditions, and ISM indexes. As we can see, this list is quite small; however, these data currently affect the monetary policy of central banks.

This week in the U.S., the core Personal Consumption Expenditures (PCE) index, the second estimate of second-quarter GDP, durable goods orders, and a revision to the annual NonFarm Payrolls data will be released. We believe the market will react only to the revision of the NonFarm Payrolls data. All other data, including the PCE index, will likely go unnoticed by the market. Although Fed representatives have repeatedly called the PCE index the most important inflation indicator, we do not share that view, and neither does the market. We focus on the indicators that the market reacts to, not just those released for formality. The consumer price index for July is already known; the August report will be released in September. Therefore, for us, the PCE index is no more than a derived measure from the main CPI.

It is also important to note that on Friday, during the Jackson Hole symposium, Kevin Warsh will deliver a speech. Generally, we have been reminding traders in recent months that Donald Trump appointed Warsh to ease monetary policy rather than tighten it. The current state of the U.S. economy and labor market does not suggest an increase in the key rate. Nevertheless, the market continues to anticipate hawkish statements from Warsh and a rate hike by the end of the year. We believe the Federal Reserve may not raise the key rate at all for the rest of the year, which would not be surprising, given that raising the key rate would increase Treasury yields, which the U.S. Treasury is currently actively fighting. Additionally, this would lead to an economic slowdown and further deterioration of the labor market. Consequently, the prospects for the American currency remain solely corrective.

The average volatility of the EUR/USD currency pair over the past 5 trading days as of August 25 is 49 pips and is characterized as "medium-low." We expect the pair to move between 1.1618 and 1.1716 on Tuesday. The upper linear regression channel is sloping downward, indicating a continuation of the bearish trend; however, the trend has already changed. The CCI indicator has once again entered the overbought area, warning of a potential new downward pullback.

Nearest Support Levels:

S1 – 1.1658

S2 – 1.1597

S3 – 1.1536

Nearest Resistance Levels:

R1 – 1.1719

R2 – 1.1780

R3 – 1.1841

Trading Recommendations:

The EUR/USD pair continues its upward trend on the 4-hour timeframe, which may signal the beginning of a new phase in the global upward trend on higher timeframes. The global fundamental backdrop for the dollar remained negative, but in 2026, geopolitical factors, followed by a hawkish stance from the Fed, provided significant support for the U.S. currency. However, these factors no longer support the dollar. With the price positioned below the moving average, short positions may be considered on corrective bases targeting 1.1597. Long positions remain relevant above the moving average line, with targets at 1.1719 and 1.1780.

Notes on Illustrations:

• Linear Regression Channels help identify the current trend. If both are pointing in the same direction, it indicates a strong trend.
• Moving Average Line (settings: 20, 0, smoothed) determines the short-term trend and the direction in which to trade.
• Murray Levels – target levels for movements and corrections.
• Volatility Levels (Red Lines) – the likely price channel in which the pair will trade over the next 24 hours based on current volatility metrics.
• CCI Indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates an impending trend reversal in the opposite direction.