As the Square of 94 Fades: Traders Pivot to Powell's Jackson Hole Moment

The crypto and forex markets face a pivotal Friday as Federal Reserve Chair Jerome Powell takes the stage at Jackson Hole Economic Policy Symposium (August 21-23, 2025). With rate-cut probability plummeting from last week’s square of 94 percent to 83 percent for September’s decision, traders are recalibrating their exposure across risk assets—and EUR/USD is the canary in the coal mine.

The Probability Shift That’s Reshaping Sentiment

Last week, markets priced in a near-certain 25 basis point cut on September 17. That 94% conviction—nearly the square of that figure—has evaporated into 83% within days. The current fed funds rate sits at 4.5%, with a cut to 4.25% now less assured. This erosion of certainty, coupled with Powell’s scheduled remarks at 14:00 GMT Friday, has left traders in a state of heightened anxiety.

Why the sharp reversal? Mixed macroeconomic signals have muddied the picture. Inflation is moderating, suggesting an accommodative shift is warranted. Yet geopolitical tensions, trade policy uncertainty, and labor market weakness don’t paint a crystal-clear case for aggressive easing. Powell’s guidance will clarify whether the Fed sees one cut, two cuts, or three cuts by year-end—outcomes that could send the dollar and cryptocurrencies in dramatically different directions.

The EUR/USD Technical Setup: A Tale of Indecision

The EUR/USD pair, up 13% year-to-date, has become the primary vehicle for expressing dollar sentiment. Currently hovering near 1.168, the pair is sandwiched between two critical levels:

Upside scenario (Dovish Powell): A break above the July 1 high of 1.182 opens the door to 1.2, then 1.227 (May 2021 peak) and 1.235 (January 2021 high).

Downside scenario (Hawkish Powell): A retreat below 1.16 could accelerate a decline toward 1.14 support, with technical targets as low as 1.10 if momentum falters.

The momentum picture is eerily neutral. RSI trades at 50—textbook indecision—while MACD remains flat with no crossover signals. This “calm before the storm” dynamic suggests that Powell’s tone, rather than price action before his speech, will detonate the move.

Why Lower Rates Fuel Risk Assets—And Why That Matters for Crypto

When the Fed cuts rates, U.S. Treasury yields decline, making dollar deposits less attractive. Capital flows into equities, commodities, and cryptocurrencies—assets that thrive in a low-rate environment. A dovish Powell would weaken the dollar, benefiting not just EUR/USD but the entire spectrum of alternative assets. Conversely, hawkish rhetoric would reverse this flow, pushing money back into dollar savings and pressuring crypto valuations.

Lessons from Powell’s Past Interventions

On August 26, 2022, Powell signaled further rate hikes. The dollar surged; the S&P 500 sold off sharply. Fast-forward to August 23, 2024: dovish comments triggered a stock market rally and broad dollar weakness. History suggests Powell’s words carry outsized impact—a precedent traders can’t ignore.

What’s Really at Stake Beyond Interest Rates

Powell’s remarks may extend beyond rate trajectories. The discussion could touch:

• Trade policy: Tariff uncertainties with Europe, Japan, and China continue to roil markets
• Geopolitical factors: U.S.-Russia negotiations on Ukraine may influence Fed confidence in economic stability
• Labor dynamics: Recent employment weakness and rising unemployment could justify bolder rate cuts

Each of these themes influences the Fed’s comfort level with easing—and thus, the dollar’s trajectory.

Risk Alerts for Active Traders

Leverage sensitivity: EUR/USD typically trades on leverage. A sharp breakout could liquidate positions on both sides, amplifying moves. The narrow technical range combined with known macro catalysts creates explosive potential.

Profit-taking risk: Early-year EUR/USD longs (+13% YTD) are vulnerable to hawkish surprise, as traders bank gains and the dollar rebounds.

Cross-asset contagion: Powell’s message will ripple through stocks, gold, and cryptocurrencies. Traders should monitor these correlations for early warning signals.

The Verdict: Prepare for Volatility

The Jackson Hole symposium carries heightened significance this year. With neutral technicals, conflicting fundamental signals, and a probability shift from 94 percent conviction to 83 percent, the stage is set for a substantial move.

Traders should monitor:

• Powell’s specific language around rate cuts and inflation
• EUR/USD breaks above 1.182 (bullish dollar weakness) or below 1.16 (bearish dollar strength)
• Secondary market reactions in stock index futures, gold, and crypto—particularly Bitcoin
• Changes to September rate-cut odds in real-time markets post-speech

The square of 94 may have faded, but the importance of this Friday’s monetary policy messaging has only intensified. Position sizing and stop-loss placement aren’t optional—they’re essential.