EUR/USD is gathering strength to around 1.1590 during early Asian trading on Monday, with the US Dollar edging lower against the Euro even after Federal Reserve Chair Kevin Warsh struck a notably hawkish tone at Friday's Jackson Hole symposium. Traders are now looking ahead to Germany's preliminary Consumer Price Index (CPI) release later Monday for the next directional cue.

Warsh warns the Fed still has "work to do"

Speaking at Jackson Hole on Friday, Warsh said policymakers will "have work to do" if they aren't confident cost-of-living pressures are easing for Americans. "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed," he said. "Otherwise, we have work to do."

The market reaction was immediate. According to the CME FedWatch tool, traders are now pricing in nearly a 57.5% probability of at least a 25-basis-point hike at the Fed's next meeting on September 15-16, sharply up from just 35% before the speech. The FXS Speechtracker score for Warsh's address came in at 7.4, well above the historical average of 6.5, reflecting real concern that underlying inflation hasn't convincingly moved toward the Fed's 2% target. Warsh also argued that financial conditions remain far from restrictive and that recent better-than-expected summer inflation prints don't signal a meaningful shift in the underlying trend — a vigilant stance that's broadly supportive of the Dollar. The FXS Fed Sentiment Index held steady at an elevated 129.70, confirming the broader policy narrative remains firmly hawkish even after the Fed's decision to hold rates at its July meeting.

Yet the Euro isn't backing down

Despite that hawkish shift on the US side, the Euro is holding its ground — largely because the ECB's own tightening story has been hardening in parallel. Analysts at Scotiabank note that this week's data "have confirmed the need for renewed hawkishness from the ECB," a shift clearly reflected in recent comments from Governing Council member Isabel Schnabel. Schnabel flagged upside risks to inflation from both energy prices and stronger-than-expected growth, and maintained her expectation for a 25-basis-point hike in September along with continued tightening in the quarters that follow.

Germany's own inflation data could reinforce that case. Preliminary figures due later Monday are expected to show German CPI rising to 2.9% year-on-year in August, up from 2.8% in July, while the Harmonized Index of Consumer Prices (HICP) is projected to climb to 3.0% year-on-year from 2.8% previously. A hotter-than-expected print could give the shared currency a further near-term boost.

What the charts are showing

On the daily chart, EUR/USD holds a mildly bullish near-term tone, sitting above the 100-day simple moving average and the lower Bollinger Band while pressing against the 20-day Bollinger SMA, which is acting as a nearby pivot point. The Relative Strength Index sits at 52.8, just above neutral — suggesting momentum has cooled somewhat but still leans slightly to the upside rather than flashing overbought signals.

Immediate resistance sits at the Bollinger middle band near 1.1595, with a stronger hurdle at the upper Bollinger Band around 1.1710, where any rally could start to look stretched. On the downside, initial support is located at the 100-day SMA near 1.1570, ahead of a more meaningful trigger at the lower Bollinger Band around 1.1480 — a daily close below that level would undermine the pair's constructive bias and open the door to a deeper pullback.

What this means for EUR/USD

The pair is currently caught between two hawkish central bank narratives rather than one currency clearly winning out. Warsh's Jackson Hole remarks gave the Fed's case a real boost, but the ECB's own tightening conviction — reinforced by Schnabel's comments and this week's German inflation data — is giving the Euro enough support to hold its ground. The near-term direction likely comes down to which side's data surprises harder.

What traders should prepare for

  • Germany's preliminary August CPI and HICP release later Monday, with a hotter print likely to support further Euro gains

  • Continued repricing of Fed rate-hike odds ahead of the September 15-16 meeting, now near 57.5% for a 25bps move

  • Further ECB commentary from Governing Council members reinforcing (or softening) expectations for a September hike

  • A test of the 1.1595 pivot and, beyond that, the 1.1710 resistance zone if bullish momentum extends

  • A move back toward the 1.1570 support and 1.1480 lower band if the Dollar's hawkish narrative regains the upper hand

Bottom line: The Euro's resilience against a hawkish Fed says less about Dollar weakness and more about how firmly the ECB's own tightening case is taking hold.