EUR/USD - Next Week Direction?Euro / United States DollarCMCMARKETS:EURUSDXianWEURUSD - The Euro has outperformed recently, consolidating above 1.1650 amid a persistent USD correction and mounting expectations for a Federal Reserve rate cut as early as September. - Markets have been quick to price in policy changes after a pronounced dovish turn at Jackson Hole, where the Fed Chair stressed labor risks and cast doubt on further tightening. - This policy divergence theme—Fed turning more accommodative versus an ECB hesitant to ease and committed to maintaining price stability, remains a principal narrative fueling the EUR/USD uptrend. While Eurozone activity data remains tepid (Q2 GDP just +0.1% QoQ, PMIs in contraction), core inflation is sticky at 2% and wage growth has moderated the dovish case for now. - Meanwhile, political headlines from the US inject a layer of uncertainty, with board reshuffles at the Fed and growing speculation over potential leadership changes. Tariff threats and global trade frictions have put a cap on USD bounces, as investors realize the risks to both US corporate margins and broader risk sentiment. Technically, EUR/USD continues to respect its bullish channel since March, with price action now pausing near the upper band as oscillators signal overextension. - From a position point of view, the pair remains above its 4-hour EMA, a classic reference in institutional trading. Most retracements toward 1.1650–1.1620 have been absorbed by buyers; this area coincides with both prior supply-turned-demand and a behavioral anchor observed via option gamma hedging over the last week. Institutional demand for the euro is further evidenced by a decline in US Treasury yields, 0.5% week-on-week, while speculative short positioning in USD has quietly reached a three-month high (source: CFTC). These underlying forces lend fundamental support to the idea of “buying the dip” rather than chasing strength. What I’m watching: - The interplay between labor data and CPI figures will be decisive for forward Fed guidance. Surprise downside in CPI or upside in Eurozone PMIs could trigger a sharp repricing. - Geopolitical and tariff developments remain headline drivers, impacting both intraday volatility and macro risk appetite. - Typical summer liquidity patterns can exaggerate moves—a ‘flush’ into support could offer optimal trade location for bulls. Overall thesis: As long as policy divergence remains in focus with the US expected to cut before the ECB, and barring sharp deterioration in Eurozone growth, EUR/USD presents asymmetric reward versus risk favoring continuation higher. Any measured pullback to the 1.1650–1.1620 zone is an attractive area for medium-term accumulation targeting the prior swing high and potentially new year-to-date highs.