2022-08-30 • Updated
Fed Chair Powell’s comments on the Jackson Hole Symposium resulted in the worst weekly candle in the US500 index since June. Most risky assets experienced severe drawdowns, and EURUSD returned to the above-parity area. We explain everything you need to know about the Symposium in this article.
As far as I remember, it was the first time Powell had an extremely hawkish speech since the Covid-19 pandemic. In eight minutes, he pointed directly at current economic concerns, saying that the road ahead will bring some pain to households and businesses. He says it’s an “unfortunate cost of bringing down inflation.” Federal Reserve is ready to imply higher interest rates, even if it does some damage. The next rate change will likely be a 75-basis-points hike, with the following rate changes depending only on the economic data. Also, high interest rates will stay with us for longer before descending.
US interest rates
Isabel Schnabel, a top European Central Bank official, said she and her colleagues had little choice but to continue tightening even if Europe’s economy tips into recession, which is becoming increasingly likely. As you can see, the rhetoric is similar to Powell’s, and the effect on the markets is the same. Julia Coronado, president of MacroPolicy Perspectives LLS, said that “even the ECB, which has a much higher chance of a recession in the next 12 months than the US, knows that the direction of travel is you need to raise rates, and you need to raise rates in a pretty steady fashion.”
EU interest rates
The BOE’s governor Bailey had a statement as well. The bank started to wind down (shrink) its balance sheets, which they scaled up during the pandemic to relieve pressure on banks and keep long-term interest rates low. If the bank continues to print more money (wind up balance sheets), it will speed up inflation. The BOE understood that interest rates should be significantly increased, and it’s time to stop creating money. Therefore, it has concerns about banks’ long-term financial stability.
UK interest rates
It became clear that the ECB, the Fed, and the BOE were well overdue with rate hikes, and now they have no choice but to bite the bullet and cool down the economy with the harshest measures. Central bankers’ actions already sent some assets into a freefall and boosted the greenback. Let’s look at various charts to make predictions based on new information.
Right after Powell’s speech (which was the most anticipated at Jackson Hole), the US500 index reacted with a sharp decline and lost 3.47% during the day. The plunge ended right at the 100-daily MA, but the next day opened below it and touched the 50-daily MA. Considering all I said above, the US500 has a high chance of breaking the moving average and declining.
US500 daily chart
Resistance: 4330, 4500
Support: 3900, 3650, 3550
The pair has been moving inside a descending channel for eight months, and while it’s under the trendline, the outlook is bearish—however, multiple divergences on the RSI hint about a soon reversal in the pair. The USD is feeling strong and may push the pair lower to the support level of 0.9700. From it, I expect a gain of bullish momentum and a soar to the parity level and higher.
EURUSD daily chart
Resistance: 1.0390, 1.0790
Support: 0.9954, 0.9700
Gold loves the weak dollar, but sometimes the metal can grow with the currency. XAUUSD broke through the trendline and made two retests. I consider this a strong bullish signal for the price, but you must wait for the daily candle to close above the resistance of $1790. For conservative traders, it would be better to open a buy trade when gold crosses the 200-daily MA (dark line).
XAUUSD daily chart
Resistance: 1790, 1875, 2000
Support: 1680, 1640
The pair looks bearish due to several divergences on the RSI and retest of the last high. However, the breakout of the previous high will open a road to 142.00 and 144.00 resistances. A bounce from the current levels will signal a trend change despite the USD strength, and USDJPY may slide to the 200-daily MA (125.00).
USDJPY daily chart
Resistance: 142.00, 144.00
Support: 136.00, 133.00, 125.00
There are fundamental reasons for the USD to grow, including hawkish US monetary policy and slowing down of inflation. On the other hand, the technical picture is rather bearish for the USD and bullish for the gold. Even if the greenback grows for another month, it would be the last rally of the US dollar because as the tightening ends, funds will go away from the currency into risky assets.
Do you want to get updates Live? Subscribe to the @FBSAnalytics Telegram Channel, where I post more daily trade ideas!
During the Asian session on Wednesday, the USD/CAD pair rebounded after two days of losses, reaching around 1.3590. This uptick is fueled by a stronger US dollar and lower crude oil prices, which put pressure on the Canadian dollar. The decline in Western Texas Intermediate (WTI) oil prices to approximately $80.70 is attributed to...
The Australian Dollar (AUD) rebounds on Monday, despite a slight dip in the US Dollar (USD) and higher US Treasury yields. Investors are eyeing Australian monthly Consumer Price Index (CPI) data for February and US Gross Domestic Product (GDP) for Q4 2023. The AUD gains momentum as the ASX 200 Index rises, especially in mining and energy sectors. Additionally, the Aussie...
Gold prices rose on Monday as the US Dollar weakened amidst speculation about potential Federal Reserve rate cuts starting in June. This weakened Dollar was partly due to improved risk sentiment pushing US Treasury yields lower. Despite facing challenges from declining yields, gold prices recovered to nearly $2,170 per troy ounce, driven by the Dollar's weakness. Federal Reserve Chair...
Jerome H. Powell, the Federal Reserve chair, stated that the central bank can afford to be patient in deciding when to cut interest rates, citing easing inflation and stable economic growth. Powell emphasized the Fed's independence from political influences, particularly relevant as the election season nears. The Fed had raised interest rates to 5.3 ...
Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.
Your request is accepted.
A manager will call you shortly.
Next callback request for this phone number
will be available in
If you have an urgent issue please contact us via
Live chat
Internal error. Please try again later
Don’t waste your time – keep track of how NFP affects the US dollar and profit!
|
