USD Strength After Powell Remarks Drives EUR/USD Below 1.1550, USD/JPY Breaks Higher

Summary: Powell Speech Spurs Broad Dollar Rally

Markets reacted strongly after Federal Reserve Chair Jerome Powell said a December rate cut is "far from certain," sending the CME FedWatch odds for a December cut down to roughly 69% from 93% a week earlier. The firmer dollar pushed EUR/USD below 1.1550 and supported a technical breakout in USD/JPY above the 153.25–153.30 zone. Short-term momentum favors dollar strength, but macro risks — including a prolonged US government shutdown and potential central-bank responses — warrant disciplined risk management.

EUR/USD — Technical Weakness and Trade Considerations

EUR/USD fell under 1.1550 following Powell's comments as markets repriced Fed easing. The EUR is vulnerable to further downside if markets continue to discount a December cut; see how the euro is vulnerable to losses amid political and fiscal headlines. Key considerations for EUR/USD traders include the following: the pair is exhibiting bearish momentum into short-term supports, liquidity may be thinner amid ongoing geopolitical and fiscal headlines, and ECB commentary (retaining "full optionality" as noted by officials) could trigger rapid reversals.

Near-term levels and scenarios

Watch 1.1550 as a reference level — a sustained move below it opens room for continuation toward lower support zones. For further context on recent downside pressure, review the EUR/USD year-to-date low coverage. Conversely, any hawkish surprises from the ECB or a sudden increase in Fed-cut probability would likely trigger short-covering rallies. Traders considering directional exposure should size positions conservatively and use technical stops to manage risk.

USD/JPY — Breakout on Policy Divergence

USD/JPY has broken above the 153.25–153.30 resistance and moved past 154.00, with daily oscillators showing positive momentum. Policy divergence is a key driver: Fed hawkishness versus BoJ timing uncertainty, compounded by speculation that Japanese fiscal policy could remain expansionary. Near-term upside targets identified by technicians sit around 154.75–154.80 and 155.00; recent moves are comparable to past episodes such as the USD/JPY climb to 152.8.

Risks and guardrails

Risk to the bullish USD/JPY view includes possible intervention or verbal warnings from Japanese authorities, and a decisive break back below 152.00 would invalidate the near-term breakout. The ongoing US government shutdown is an additional macro wildcard — weaker US data from a prolonged shutdown could undermine dollar strength and reverse gains.

Cross-market Context: Oil, CAD and Safe Havens

WTI at around $61/bbl after OPEC+ signalled a pause in output increases for Q1 2026 supports commodity currencies like CAD, which could limit USD/CAD upside despite the dollar rally. Meanwhile, trade optimism and US–China de‑escalation have softened safe-haven demand for gold, demonstrating how policy and geopolitical shifts are driving cross-asset flows that influence FX correlations.

Execution, Automation and Risk Management

Short-term traders can look for momentum continuation trades on USD strength, particularly in EUR/USD and USD/JPY, but should combine technical triggers with macro event guardrails. Considerations include position sizing, stop placement, and monitoring correlated markets (oil, US yields, equities).

Retail traders who want to implement systematic rules can explore automated approaches. For example, a Forex Trading Bot can help execute defined entry and exit rules across timezones, and the Trade Assistant Bot is useful for codifying risk parameters and trailing-stop logic. Automated trading can reduce execution slippage and enforce discipline, but it still requires oversight around major macro events such as the Loan Officer Survey and ongoing fiscal developments.

Event watch

Today's Loan Officer Survey (US, medium volatility) and any Fed or ECB commentary this week will be catalysts for volatility. Keep economic releases and central-bank speeches on your calendar and avoid large unhedged positions into high-uncertainty windows.

Practical trade ideas

1) EUR/USD: consider tactical short exposure on confirmed momentum below 1.1550 with tight stops; monitor ECB signals for reversal opportunities.

2) USD/JPY: look for continuation above 154.00 targeting the 154.75–155.00 area, but reduce exposure if authorities signal intervention or price breaks below 152.00.

3) Correlation play: watch USOIL and USD/CAD; stronger oil on OPEC+ pause could bolster CAD and offset some USD strength in the pair.

Conclusion

Fed Chair Powell's comments have materially reduced the market's certainty about a December rate cut and catalyzed a broad dollar rally that is reshaping short-term FX setups. EUR/USD and USD/JPY present clear, actionable scenarios for traders, but persistent macro risks — notably the US government shutdown and possible central-bank interventions — require disciplined risk management.

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