Jerome Powell’s speech on Friday carried a distinctly dovish tone. Market expectations of an imminent interest rate cut increased significantly, which resulted in a sharp weakening of the US dollar. On the EUR/USD chart, this shift was expressed through the formation of a bullish impulse wave A→B.
However, on Monday, as is often the case after a strong initial emotional reaction to major news, the price underwent a correction. Traders and investors reassessed the outlook in light of the Fed Chair’s softened stance, which tempered some of the optimism from Friday.
What stands out most is that this corrective movement was particularly pronounced in the EUR/USD pair, where the subsequent decline B→C nearly erased the entire surge from Friday. Such behaviour may indicate underlying weakness in the euro itself. This impression gains further weight considering that the euro index EXY, which measures the euro’s performance against a basket of currencies, has already risen by approximately 13% since the beginning of the year — suggesting the currency may be stretched.
The EUR/USD exchange rate showed a less dramatic response to another notable development — President Trump’s decision to dismiss Lisa Cook, a member of the Federal Reserve’s Board of Governors. While media outlets continue to debate whether the President has the legal authority to remove her from office, traders are more likely focused on how EUR/USD could evolve following the volatility sequence of A→B→C.
Recently, we identified a descending channel on the EUR/USD chart, formed by a consistent sequence of lower highs and lower lows throughout the summer months. The upper boundary of this channel effectively acted as resistance, halting Friday’s bullish move.
From the bearish standpoint:
→ The price has already broken below an ascending trajectory (shown in purple), and the lower purple line, which previously acted as support, has now flipped into resistance, as illustrated by the arrow.
→ Today’s rebound from the 1.1600 support level appears weak, particularly given the long upper wick on the candlestick, which reflects selling pressure.
→ If the current rebound merely represents a temporary correction following the bearish B→C impulse, it is worth noting that the recovery has not even managed to reach the 50% Fibonacci retracement level.
Adding to the bearish case, the B peak exceeded the previous August high only slightly, creating the impression of a bull trap — a situation in which late buyers may have been misled into entering long positions prematurely.
Taken together, these technical signals suggest that in the short term, bears could make another attempt to break through the 1.1600 support area, potentially pushing EUR/USD down toward the median line of the primary descending channel.
FXOpen offers spreads from 0.0 pips and commissions from $1.50 per lot. Enjoy trading on MT4, MT5, TickTrader or TradingView trading platforms!
The FXOpen App is a dedicated mobile application designed to give traders full control of their accounts anytime, anywhere.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Disclaimer: This sponsored market analysis is provided for informational purposes only. We have not independently verified its content and do not bear any responsibility for any information or description of services that it may contain. Information contained in this post is not advice nor a recommendation and thus should not be treated as such. We strongly recommend that you seek independent financial advice from a qualified and regulated professional, before participating or investing in any financial activities or services. Please also read and review our full disclaimer.
