This week will be a pivotal test for traders betting on a Federal Reserve rate cut, as Chair Jerome Powell is set to outline his view on the economy. In light of the latest batch of economic data, taking a clear position will be even more difficult than before.

Powell's speech on Friday at the Federal Reserve's annual meeting in Jackson Hole, Wyoming, marks a decisive stage for the market, where a quarter-point rate cut next month is seen as almost guaranteed, and at least one more cut is expected before year-end. In recent years, Powell has used this platform to deliver market-moving remarks, and this time the situation is potentially pivotal.

Traders are confident that labor market weakness has paved the way for a softer tone from the Fed chair, although unexpectedly strong inflation data has made some economists pause. This tension between slowing hiring and persistent price pressures creates uncertainty over the future course of monetary policy, forcing market participants to weigh every signal carefully. The impact on financial markets is clear: fluctuations in bond yields, stock market volatility, and currency swings all reflect this nervousness. Investors are trying to anticipate which factor—weak labor conditions or stubborn inflation—will dominate the Fed's decisions. The outcome will determine whether the economy receives further support through rate cuts or whether the regulator chooses to keep rates steady to avoid fueling an inflationary spiral.

At present, investors expect Powell to avoid revising the forecast of a rate cut next month, while reminding that the policy decision on September 17 will depend on several more reports to be released before that meeting.

All of this heightens the focus on the Jackson Hole discussions. Three years ago, Powell raised borrowing costs, warning that the fight against inflation would bring serious challenges for households and businesses. At last year's symposium, he signaled that the Fed was prepared to cut borrowing costs from a two-decade high. On that day, the dollar fell sharply, as his remarks confirmed traders' bets on rate cuts. In September of that year, the Fed delivered the first in a series of cuts, lowering the benchmark rate by half a percentage point.

This Friday, many economists expect a repeat of that move, betting on the Fed adopting a dovish stance going forward. Growing pressure from President Donald Trump and other administration officials to reduce borrowing costs only fuels such expectations. Powell has made clear for months that he needs time to assess the impact of tariffs on inflation, and he has maintained this position despite Trump's attempts to force him to cut rates.

A faster pace of monetary easing could well support the economy at a time when inflation stubbornly exceeds the Fed's target, while Trump's tax-and-spending package may provide fiscal support. Combined with investor concerns over White House pressure on the central bank and the president's decision to replace the head of the Bureau of Labor Statistics, this could push asset managers toward further weakening of the dollar.

As for the current technical outlook for EUR/USD, buyers now need to take control of the 1.1730 level. Only then will it be possible to target a test of 1.1770. From there, the pair could reach 1.1790, though doing so without support from major players would be quite difficult. The furthest target remains the 1.1825 high. In case of a decline, I expect significant buying activity only near 1.1695. If no buyers appear there, it would be better to wait for a renewal of the 1.1660 low or to open long positions from 1.1635.

As for the current technical outlook for GBP/USD, pound buyers need to overcome the nearest resistance at 1.3555. Only then will it be possible to target 1.3590, a level that will be difficult to break above. The furthest target will be the 1.3615 level. In case of a decline, the bears will try to retake control of 1.3520. If they succeed, a breakout of this range would deal a serious blow to the bulls' positions and push GBP/USD down to the 1.3480 low, with the prospect of extending toward 1.3445.