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- The week in FX and Crypto: August 26, 2025
The week in FX and Crypto: August 26, 2025
Real-World Trading Insight. No Hype, Just Edge.
mark schaefer
August 26, 2025
In This Issue:
Powell's Jackson Hole surprise and the market reaction
The week's setups and how they played out
Why diversification matters more than ever in this environment
Key levels for the week ahead
Subscriber Poll: Please share your ideas for future issues!
Powell caught markets off guard at Jackson Hole. His dovish pivot was much stronger than the market expected, with explicit warnings about "downside risks to employment" and signals that rate cuts are coming soon. The knee jerk reaction was strong.
Rate cut expectations for September jumped from 72% to 91%. That's a large repricing in one speech.
Bitcoin and Ethereum looked like they were ready for another leg lower before Powell but rallied sharply along with equities after the news came out.
As expected the USD index fell 1.3% on the day - a sharp reversal after trading higher for the previous six days straight. EUR/USD traded up to 1.1742, up 1.3% from the low earlier in the day. USD/JPY was the winner, selling off 1.5% and printing a bearish engulfing pattern.
Here's what this week reinforced: when central bankers surprise markets with policy shifts, technical analysis takes a backseat. All those support levels, resistance zones, and chart patterns become secondary to the fundamental repricing that follows.
The lesson isn't about predicting what the outcome of a central bank speaker, or data release, will be as much as it is about understanding how the markets react when the statements deviate outside the range of expectations.
Institutional Approach: Institutional managers apply their strategies across a diverse universe of markets to smooth out volatility and reduce concentration risk. The multiple markets are also necessary to deploy capital at scale.
How Last Week's Setups Played Out
A few calls from last week played out before Powell changed everything:
EUR/USD: +115 points from newsletter and X post - Strong bearish confluences: Daily overbought, 4hr bearish divergence AND reversal bar from overbought levels
BTC: Daily divergence delivered 3,910 points highlighted in the last letter, then continued another +2,500 points down to the 112k support level flagged
ETH: Bearish setup continued another 255 points lower for a total move of 558 points from the flagged level
EUR/GBP: Bounced +63 points from support level .8600/10
GBP/AUD: +41 points before going back up through the stop level - reversal negated
Note: These measure market reactions from flagged levels, not trading results. Implementation varies by individual approach.
What This Means Going Forward
The big question now is whether this dovish pivot marks the start of a sustained easing cycle or just a temporary policy adjustment. Powell's surprise created clarity around September, but the Fed remains data-dependent.
The markets now will be driven by the main underlying theme …how much and how fast will the FED cut rates. In this environment risk assets become even more correlated than when the interest rate picture is more predictable.
Long BTC, ETH, S&P and short USD are all the same trade right now. They'll all move on the same headlines and statements. That's not diversification, it’s concentration risk.
Consider diversifying in timing. Maybe look for opportunities in non-USD pairs or crypto crosses rather than against the USD.
Week Ahead
What matters now are the key levels for the week ahead:
Interesting that even with the USD selloff, we haven't seen new lows in any of the major pairs. The moves were significant but not enough to break key structural levels.
The USD will likely meet sellers on rallies as the dovish sentiment filters into the market.
USD Index: Resistance 98.70 (Friday high and previous pivot)
EUR/AUD: Bearish reversal on Thursday at 1.8157 - close above negates the reversal. Downside support 1.7900 then 1.7700
BTC: Daily close below 112,161 pivot opens the door to test the 38% Fibonacci at 105,380. Topside resistance is still the high at 124,514
ETH: Daily bearish divergence (4,670.00). First significant support not until 3870.38
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