The EUR/USD currency pair literally plummeted on Friday. However, it only seems that way. In reality, the pair's volatility that day was only 80 pips, which is not much. Yes, the dollar gained nearly 1 cent in just a few hours. Yes, there were quite objective (albeit contradictory) reasons for this. However, the European currency had been rising for over a month, almost without pullbacks leading up to Friday. Thus, a correction was inevitable, as the CCI indicator had repeatedly warned. Therefore, in our view, the fall of the pair would have happened even without Kevin Warsh's speech or the annual Nonfarm Payrolls report.

In this article, we will examine Warsh's speech in Jackson Hole. Was the Federal Reserve chair's rhetoric indeed "hawkish," and is the central bank finally ready to raise the key interest rate? In short: no. Warsh officially stated, for the third time, that inflation is very high and needs to be addressed. Let's remember that in the previous two instances, such statements did not lead to a tightening of monetary policy. Thus, we do not understand what the market was pleased about when buying dollars. Warsh stated for the third time that high inflation theoretically implies a rate hike. But he said nothing about the labor market, which is again in a coma. Nothing about the slowdown in economic growth in the second quarter either. Thus, we would not be surprised if the Fed kept the key rate unchanged in September.

It should be reiterated that Warsh did not come to replace Jerome Powell to tighten monetary policy. And Donald Trump has resumed pressure on the Fed, demanding that it lower the key rate. Moreover, Trump again wants to strive for the dismissal of Lisa Cook, and after Cook, other members of the Monetary Committee who do not want to press the "lower rate" button will follow.

Thus, we believe that the real probability of tightening monetary policy in September following Warsh's Friday speech has not increased in the slightest. Markets are, of course, entitled to expect a tightening; traders are entitled to pay attention to indicators like FedWatch. But it should be remembered that expectations are just expectations, and indicators cannot predict the future. The dollar strengthened, and it probably strengthened logically. However, we still do not see any reasons for a rise in the dollar, except for corrections. By the way, this is the correction we are currently witnessing. It may last for a few weeks, but the global trend, in our view, has begun to change to upward. The pair has remained flat for a full year on the weekly timeframe. Since 2022, it has been in an upward trend. Therefore, after the flat ends, we expect the trend to resume. We definitely see no grounds for the pair to fall below the previous low towards 1.1350.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of August 31 is 40 pips, which is characterized as "low." We expect the pair to move between 1.1534 and 1.1630 on Monday. The higher channel of the linear regression is directed downward, indicating the continuation of the downward trend, even though the trend has already changed. The CCI indicator has entered oversold territory, suggesting the possible completion of the current correction.

Nearest support levels:

S1 – 1.1536

S2 – 1.1475

S3 – 1.1414

Nearest resistance levels:

R1 – 1.1597

R2 – 1.1658

R3 – 1.1719

Trading Recommendations:

The EUR/USD pair continues an upward trend on the 4-hour timeframe, which may be the beginning of a new phase of the global upward trend on higher timeframes. The global fundamental backdrop for the dollar remains negative, but in 2026, first geopolitics and then the Fed's "hawkish" stance provided powerful support for the American currency. However, at the moment, these factors no longer support the dollar. With the price positioned below the moving average, short positions can be considered on a corrective basis, targeting 1.1536 and 1.1534. Above the moving average line, long positions remain relevant with targets of 1.1719 and 1.1780.

Explanations for Illustrations:

Regression channels help determine the current trend. If both are directed in the same direction, it means the trend is currently strong;

The moving average line (settings 20,0, smoothed) defines the short-term trend and the direction in which trading should be conducted at present;

Murray levels are target levels for moves and corrections;

Volatility levels (red lines) are the probable price channel within which the pair will spend the next 24 hours based on current volatility indicators;

The CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.