Euro drifts lower as Fed hawks set the stage for Warsh

• EUR/USD edges slightly lower on Friday as investors refrain from taking large positions ahead of Kevin Warsh’s speech.
• The US Dollar benefits from calls by several Federal Reserve officials for tighter monetary policy amid persistent inflation.
• The latest US inflation data show that price pressures remain well above the central bank’s target.

EUR/USD trades around 1.1645 on Friday, posting a modest 0.07% decline on the day as investors adopt a wait-and-see approach ahead of a highly anticipated speech by Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole Symposium.

The pair remains under pressure after resuming its recent downward trend, with the US Dollar (USD) benefiting from a more hawkish tone among several US central bank officials. Markets are now looking to determine whether Warsh will reinforce these signals or adopt a more cautious approach regarding upcoming monetary policy decisions.

Recent comments from Fed officials lean toward tighter monetary policy. Cleveland Fed President Beth Hammack said on Friday that it is time for the central bank to act by raising interest rates, warning that delaying action could cause more pain later. Hammack also noted that inflation could end the year at around 3%, still well above the Fed’s 2% target, and argues that financial conditions are currently not particularly restrictive.

Kansas City Fed President Jeffrey Schmid also highlighted persistent inflationary pressures on Thursday, arguing that policymakers need to continue looking for ways to bring inflation under control.

Against this backdrop, Warsh’s speech represents the main catalyst for EUR/USD on Friday. Comments confirming the need to maintain or further tighten monetary policy could continue to support the US Dollar and weigh on the pair. Conversely, a more cautious-than-expected message could provide some relief to the Euro (EUR).

EUR/USD technical analysis

In the one-hour chart, EUR/USD trades at 1.1643, keeping a mild bearish bias as it continues to hold below both the 100-period and 200-period simple moving averages (SMAs) at 1.1658 and 1.1655 respectively, as well as the descending resistance trend line around 1.1667. The Relative Strength Index (RSI) near 44 sits in neutral-to-soft territory, which suggests sellers retain the upper hand while upside attempts remain capped by this nearby confluence of resistance.

On the topside, immediate resistance is located at the 200-period SMA at 1.1655, followed closely by the 100-period SMA at 1.1658 and the downtrend resistance line near 1.1667; a sustained break above this cluster would be needed to ease the current pressure and open the way toward the horizontal barrier at 1.1711. On the downside, initial support is seen at the horizontal level of 1.1614, where a clear break lower would likely reinforce the bearish tone and expose deeper losses in the near term.

(The technical analysis of this story was written with the help of an AI tool. Know more.)