Powell’s speech to be closely watched

The USD halted its four-day losing streak against its counterparts yesterday. Today, we highlight the start of the Jackson Hole Symposium and Fed Chairman Powell’s speech about the US economic outlook and monetary policy, is expected to be closely watched by traders for any clues regarding the bank’s intentions. Any dovish signals from the Fed Chairman could weigh on the USD as it would verify the market’s extensive rate-cutting expectations. The market expects the bank to proceed with its first rate cut in the September meeting and proceed with another 25-basis points rate cut in the November meeting and a 50-basis points rate cut in December. The speech is expected to affect also US stock markets and gold’s price and a possible sufficiently dovish tone in Fed Chairman Powell’s speech could provide support for US stock markets and gold’s price. On the other hand, the market’s dovish expectations may be overstretched, and should the speech show some hesitancy for extensive rate cuts it could force the market to reposition itself thus weighing on US stock markets and gold, while at the same time providing asymmetric support for the USD in the FX Market. Last but not least, should the Fed Chairman stick to the script not offering much new we may see a lukewarm reaction by the markets.

USD/JPY rose yesterday temporarily breaking the 146.00 (R1) level, yet during today’s Asian session, dropped below it once again. The downward trendline guiding the pair since the 16 of August seems to have been broken, signaling an interruption of the downward motion hence we temporarily switch our bearish outlook in favor of a sideways motion bias. Yet a downside risk seems to remain as the RSI indicator remained close to the reading of 30, implying the persistence of a bearish sentiment for the pair among market participants. Should the bears regain control over the pair, we may see it aiming for the 143.40 (S1) support line thus shifting the prementioned downward trendline to the right a bit. Should the bulls take over, we may see the pair breaking the 146.00 (R1) resistance base clearly and aiming if not reaching the 148.90 (R2) level.

North of the US border we note CAD’s weakening against the USD. On Loonie’s fundamentals, we note that yesterday Canadian National Railways and Canadian Pacific Kansas City locked out more than 9000 unionized workers yesterday. The action of the two railway companies practically shut down nationwide freight rail shaking the rails upon which North American supply chains roll. Ottawa has announced swift action, yet the results remain to be seen and the incident seems to have weighed on the Loonie. Also, CAD traders today are expected to keep a close eye on the release of Canada’s June retail sales growth rate. A possible acceleration could provide some support for the CAD as the May rate was substantially negative on a month-on-month level.

USD/CAD edged higher yesterday yet during today’s Asian session put the 1.3590 (S1) support line to the test once again. The downward trendline guiding the pair since the 5 of August seems to remain active hence we maintain our bearish outlook for the pair. Also the RSI indicator remained close to the reading of 30, implying the persistence of a bearish sentiment for the pair among market participants. Should the bears maintain control over the pair, we may see it breaking the 1.3590 (S1) support line clearly and start aiming for the 1.3460 (S1) support base. Should the bulls take over we may see USD/CAD, breaking the prementioned downward trendline and aiming for the 1.3775 (R1) resistance line.

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Today we get from France the business climate indicator for August, Canada’s retail sales for June and the US New Home sales figure for July, while BoE Governor Andrew Bailey speaks at the Jackson Hole economic Symposium.