Fed: Time to Make a Choice, but No Options Left

#EURUSD

Key zone: 1.1600 - 1.1720

Buy: 1.1750 (on a strong breakdown of 1.71) ; target 1.1950-1.2000; StopLoss 1.1680

Sell: 1.1600 (on strong negative fundamentals) ; target 1.1450-1.1300; StopLoss 1.1670

The market expects Jerome Powell to present a clear stance ahead of the Fed’s September 17 meeting. The key question — will the Fed Chair allow a rate cut, or will he stick to a strict policy line?

Last week was a disappointment for traders: the reaction to key US macroeconomic data looked illogical — markets were distracted by politics. However, in the coming days, as factors are reassessed more soberly, a stronger move is expected.

• Even the rise in core CPI inflation was ignored: the figure came in +0.2% y/y above June’s value. The tariff effect will be fully visible from September through the Christmas season, when, starting August 29, the duty-free purchase rule of up to $800 for Americans will be canceled.

• US PPI also surprised with unjustified growth, but the dollar’s reaction was weak. In contrast, Fed officials’ comments that a rate cut in September remains possible triggered another wave of dollar selling.

• Retail sales exceeded expectations (including a positive revision for June), but the market ignored this signal as well.

The situation is complicated by geopolitics. After today’s discussion on the Ukraine conflict, there is a chance that political pressure will ease, allowing market participants to finally start responding to economic data.

Particular attention should be paid to August PMI data for the Eurozone and the UK. This is the first significant statistical indicator after the US-EU trade agreements. Forecasts are moderately optimistic, but reality may turn out bleak.

Now all eyes are on the Fed’s Jackson Hole summit. Powell’s opening statement traditionally sets the monetary policy direction for at least six months ahead. This time, attempts to avoid direct answers are unlikely to work — uncertainty is too high. Another nuance: the new BLS chief, appointed with Trump’s backing, may influence the quality of statistics, adding further nervousness.

The symposium will also serve as a platform for Powell’s Fed colleagues to show support amid constant attacks from the White House. In the sidelines, the broader issue of central bank independence in modern conditions will likely be raised.

For traders, the risks are clear: Powell’s speech may turn into a source of disappointment and trigger sharp volatility. Given the speculative positions accumulated on both sides of the market, trading on such news looks unjustifiably risky.

So we act wisely and avoid unnecessary risks.

Profits to y’all!