EURUSD move largely complete for now?
Back when EURUSD began falling, I set a target of 1.3200/50 and we have now largely realised that target with yesterday’s dip to just below 1.3250. Now we await today’s Yellen speech and whether it moves the needle either way for the USD.
Chart: EURUSD
The 1.3300/50 area is the key resistance locally for EURUSD after largely having reached the 1.3200/50 target. If we get a sharp reversal here through this resistance, it could set up a further consolidation toward 1.3500 within what I still expect to remain a secular bear market. If resistance holds, the downtrend remains firmly in place, though positioning suggests that consolidation risks are rising.
Looking ahead
Today is all about the Jackson Hole speech from Fed chair Yellen. The latest batch of Federal Open Market Committee minutes was USD-supportive due to the language suggesting a growing hawkish sentiment among various FOMC members. Moreover, Plosser, the dissenter on the last FOMC statement, was out yesterday talking up the risk of having to hike the Fed Funds rate “very quickly” if the Fed waited too long to get started.
But today’s speech is from the queen dove Yellen herself – and she has consistently expressed a dissatisfaction with the improvement in labour markets. She may argue that the low unemployment rate is misleading and that other indicators suggest that the job market remains far from healthy. Such sentiment could take some of the wind out of the USD’s sails and see some consolidation.
Still, this market knows that Yellen is always and everywhere a dove, so there is also the risk that this is largely priced in and that the USD can manage at least one more surge before consolidating. After all, a USD hiccup right here and right now would come at a technically ugly spot now that we have just seen the greenback gun higher to new highs versus the Euro, the Yen and Swiss franc. (see EURUSD comments above). For USDJPY, this is the most promising looking rally since the April surge failed to take flight. The focus is on support at 103.00 if the USD is on the defensive, while the focus higher is back above 105.00. Looking at a variety of indicators, the market expectations for today’s Yellen speech are not particularly compelling – the USD is sharply stronger, especially in USDJPY in the wake of this week’s FOMC minutes release, but the Fed Funds futures and other indicators suggest little change in the anticipated trajectory of the Fed’s rate hike plans next year versus where we were as long as a year ago – in other words, is there really any risk from a rate hike trajectory perspective from Yellen dovishness today? Asset markets are blindly complacent – too complacent?
The European Central Bank's Mario Draghi will also be out speaking today.
Upcoming Economic Calendar Highlights (all times GMT)
The 1.3300/50 area is the key resistance locally for EURUSD after largely having reached the 1.3200/50 target. If we get a sharp reversal here through this resistance, it could set up a further consolidation toward 1.3500 within what I still expect to remain a secular bear market. If resistance holds, the downtrend remains firmly in place, though positioning suggests that consolidation risks are rising.
Looking ahead
Today is all about the Jackson Hole speech from Fed chair Yellen. The latest batch of Federal Open Market Committee minutes was USD-supportive due to the language suggesting a growing hawkish sentiment among various FOMC members. Moreover, Plosser, the dissenter on the last FOMC statement, was out yesterday talking up the risk of having to hike the Fed Funds rate “very quickly” if the Fed waited too long to get started.
But today’s speech is from the queen dove Yellen herself – and she has consistently expressed a dissatisfaction with the improvement in labour markets. She may argue that the low unemployment rate is misleading and that other indicators suggest that the job market remains far from healthy. Such sentiment could take some of the wind out of the USD’s sails and see some consolidation.
Still, this market knows that Yellen is always and everywhere a dove, so there is also the risk that this is largely priced in and that the USD can manage at least one more surge before consolidating. After all, a USD hiccup right here and right now would come at a technically ugly spot now that we have just seen the greenback gun higher to new highs versus the Euro, the Yen and Swiss franc. (see EURUSD comments above). For USDJPY, this is the most promising looking rally since the April surge failed to take flight. The focus is on support at 103.00 if the USD is on the defensive, while the focus higher is back above 105.00. Looking at a variety of indicators, the market expectations for today’s Yellen speech are not particularly compelling – the USD is sharply stronger, especially in USDJPY in the wake of this week’s FOMC minutes release, but the Fed Funds futures and other indicators suggest little change in the anticipated trajectory of the Fed’s rate hike plans next year versus where we were as long as a year ago – in other words, is there really any risk from a rate hike trajectory perspective from Yellen dovishness today? Asset markets are blindly complacent – too complacent?
The European Central Bank's Mario Draghi will also be out speaking today.
Upcoming Economic Calendar Highlights (all times GMT)
• Canada Jul. CPI (1230)
• Canada Jun. Retail Sales (1230)
• US Fed’s Yellen to Speak at Jackson Hole, Wyoming (1400)
• Euro Zone ECB’s Draghi to Speak at Jackson Hole (1830)