Gold tops US$4,600 as investors weigh Fed path before Jackson Hole

The EUR/USD currency pair experienced a slight uptick near 1.1655 during the opening hours of the Asian trading session on Friday. Market sentiment may become more cautious as Federal Reserve Chair Kevin Warsh delivers his key address during the Economic Policy Symposium in Jackson Hole, Wyoming. The European Central Bank (ECB) and Eurozone's strong economic data lend some support to the Euro (EUR) against the US Dollar (USD).

ECB's Executive Board member Isabel Schnabel stated that further increases in borrowing costs will be necessary due to the protracted conflict in the Middle East and the unexpectedly robust Eurozone economy. According to the ECB Watch tool, there is nearly a 96% probability that the ECB will raise the deposit rate to 2.50% at its upcoming September meeting.

Traders will be closely monitoring Fed Chair Kevin Warsh's speech in Jackson Hole, as it could provide insights into the US economy and monetary policy. The Federal Reserve might signal their intention to raise rates once more if inflation does not continue to ease, according to Mark Cabana, head of U.S. rates strategy at Bank of America.

If Warsh's speech emphasizes broader structural themes like productivity or demographics, traders may view it as dovish. Analysts at Scotiabank note that the Euro has experienced a minor loss of support due to shifting yield dynamics, with the latest turn in German-US yield spreads providing some relief. However, they emphasize that policy divergence between the ECB's tightening in September and the perceived rate hikes by the Fed remains a positive medium-term factor for EUR strength.

The EUR/USD pair maintains a bullish short-term outlook as it holds above both the 100-day simple moving average (SMA) and the 20-day Bollinger middle band. The price is approaching the upper Bollinger band resistance, while the Relative Strength Index (RSI) around 65 indicates strong but not extreme upside momentum. Support is expected in the 1.1585–1.1575 area, where the Bollinger middle band and the 100-day SMA converge to provide upward momentum before stronger resistance near the lower Bollinger band at 1.1465.

Breaking above the upper Bollinger band resistance at 1.1710 could pave the way for further gains, while failing to surpass this level could lead to a pullback towards the mentioned support zone.