EURUSD – Event Risk to Drive VolatilityEuro vs US DollarPEPPERSTONE:EURUSDPepperstoneEURUSD’s recent upward trajectory, which had seen it trade from a low of 1.1353 on July 28th up to a high of 1.1711 on August 21st came to an abrupt halt last Friday when Fed Chair Kevin Warsh was deemed to be more hawkish than expected in delivering his keynote speech from the Fed’s Jackson Hole symposium. In reiterating his commitment to bring inflation back down towards the US central bank’s 2% target he fuelled a fresh wave of speculation that the Fed could hike interest rates again when they next meet in mid-September. However, while these comments led to surge in the US dollar (USD) against the EUR late on Friday, helping EURUSD to post a low at 1.1577, a level that was retested and held yesterday morning, there is still some uncertainty about the interest rate outlook for both the ECB and Fed, given the on-going conflict in the Middle East and important economic data that is due for release across the remainder of this week. All of which has the potential to increase volatility for this popular currency pair. Looking forward, the first of these events, preliminary Eurozone inflation, is due for release later today at 1000 BST. The outcome of this inflation reading, which is anticipated to be close to multi-year highs due to rising energy costs, could clarify whether the ECB decide to hike interest rates again at their meeting on September 10th. It may also force policymakers to consider one further rate hike before the end of 2026, something which could impact EURUSD pricing. Traders may alo be anticipating what the latest series of updates on the health of the US labour market could mean for EURUSD volatility. JOLTs Job Openings is released later today at 1500 BST; ADP Private Sector Payrolls are tomorrow at 1315 BST and then it’s the turn of the all-important Non-farm Payrolls on Friday at 1330 BST. After a weaker reading last month, FX traders are becoming very sensitive the direction of the US jobs market as, if below expectations, it could keep Fed interest rates on hold, or if above expectations it could help seal a hike on September 16th. Either way, the price of EURUSD, currently trading around 1.1605 at the time of writing (0630 BST), could be vastly different come the Friday close. Technical Update: Limited Reaction in Uptrend or Negative Sentiment Shift?: Last week did see EURUSD weakness emerge after a run of recent price strength. However, as the chart below shows, from a technical outlook this decline has developed following tests of potential resistance at 1.1704, a level equal to the 50% Fibonacci retracement of the January 27th to June 24th price weakness. This type of Fibonacci retracement level can be a key focus for traders, so perhaps it isn’t too much of a surprise that the latest setback has materialised. Looking to the week ahead, the question may be whether the current sell‑off extends further, or if it proves to be a limited correction within a possible uptrend from which fresh price strength can develop again. Identifying and then monitoring how important potential support and resistance levels are defended on a closing basis may offer clues to where the next directional themes could lie for this popular FX pair. Potential Resistance Levels: We have already outlined above that 1.1704 (50% retracement) may be the first key resistance level that needs to be broken on a closing basis to open scope for further price strength. However, there is possibly a closer level to monitor that stands at 1.1643 (half latest price weakness). It may be prudent to watch how both the 1.1643 and 1.1704 levels are defended on a closing basis if tested over coming sessions. If closing breaks above 1.1704 were to materialise, it could open for the way for an extension of recent price strength toward 1.1792, which is the higher 61.8% retracement. Breaks above this level could then see further upside toward the next resistance at 1.1849 (April 17th high). Potential Support Levels: On the downside, if further price weakness were to develop, 1.1575 (38.2% retracement of July 28th to August 21st price strength) may be an important level for traders to focus on. In technical analysis, closing breaks below a 38.2% retracement level can be an indication of increasing downside momentum.