EUR/USD Reversal Warning Ahead of Bessent Plan and Jackson Hole

The EUR/USD has flashed a reversal warning ahead of Treasury Secretary Scott Bessent's plan to consolidate the US fiscal trajectory. The pair has been on a recent rally, but it appears that traders are growing cautious. A pair of gravestone dojis printed on the daily chart, indicating that the bullish breakout from the longer-term bearish trend may have run its course.

According to FOREX.com, the correlation matrix shows that rates remain the dominant macro influence on EUR/USD. However, there were signs last week that the relationship shifted slightly, with a stronger correlation with US 10-year yields than with the US-German 10-year spread.

Bessent's plan and Kevin Warsh's appearance at Jackson Hole are expected to be key drivers of market sentiment this week. Warsh has argued that markets should play a greater role in determining financial conditions, which contradicts Treasury's increasingly activist approach.