Is EUR/USD Heading for 1.20?

Fed Chairman Powell stirred up the forex pot and sent the USD lower on Friday after his comments at Jackson Hole. But the narrative for the USD remains bearish. This could bring some fresh ideas to USD pairs, which every forex trader should be interested in.

He has changed his mind on what is the biggest concern for the US economy from inflation to jobs. He stated “jobs are the bigger concern” which makes the next NFP release on the 5^th September very important.

This statement has traders betting on a September rate cut, and the USD is seeing a fresh round of selling. The odds have changed slightly with the CME FedWatch Tool changing from an 86% chance of a cut down to 75%. But for us retail traders (mere mortals) rate cuts = weaker dollar, and it means we can look at opportunities to short it against stronger currencies.

The Eurozone has been experiencing stronger fundamentals since the beginning of 2025. This combined with the poor USD fundamental drivers has seen EUR/USD form a strong bullish trend.

Positioning from the hedge funds show an increase in long contracts, but we are heading back towards the extremes we saw in early July.

I will be keeping an eye on the lower time frames here, if we get decent pullbacks into levels of minor support areas, I will be looking to take longs up to the 1.2000 levels.

I must admit that AUD/USD is one I am watching very closely.

As talked about in a previous post the Commitment of Trader reports show an extreme short position being held by the non-commercials. We can often see these positions unwind quickly. If this narrative holds with the USD weaker fundamentals, then we could be early to this AUD/USD move.

As we can see from the weekly chart, and the CoT reports the 0.6400 level could be the point where buyers want to defend. A break above last weeks high could be the trigger point for most, and again I will be watching the lower time frames for opportunities.

If the market is holding out for some poor NFP data and we don’t get it, then the pricing in of a cut by the Fed may shift dramatically. That’s the one warning we need to focus on here. This could be one of those situations where we price in cuts, but one strong jobs number could derail the whole thing and the next thing you know, cuts are off the table.

So, in that sense, please remember that risk is the most important factor when it comes to trader, just because these positions to me make sense, doesn’t mean I will risk anything out of the ordinary on it.