Special report: Jackson Hole Yellen Preview
Today’s report: Yellen Speech Headlines Friday Trade
Plenty of chop with no clear directional insight this week. But as we head into Friday, there is an expectation markets could finally get going, in light of the highly anticipated Fed Chair Yellen speech due at the Jackson Hole Symposium. German consumer confidence, UK GDP and US GDP prints also on tap.
Wake-up call
Chart talk: Major markets technical overview video
- German IFO
- UK GDP
- Two-way flow
- SNB activity
- Yellen
- OIL recovery
- Wheeler
- Jackson Hole
- Strong demand
- USDTRY
Suggested reading
- Why Central Banks May Have Met Their Limit, P. Wiseman, Inc. (August 25, 2016)
- Negative Rates are Fatal, M. Decambre, MarketWatch (August 25, 2016)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
Although the overall pressure remains on the downside, this latest break back above the 100-Day SMA has triggered a short-term shift exposing next key resistance at 1.1428. A break above 1.1428 would be a more significant development, opening the door for a full retracement back to the 2016 high at 1.1617 further up. At this point, back below the 100-Day SMA would be required to signal a more immediate bearish resumption.
EURUSD – fundamental overview
The Euro held up surprisingly well on Thursday in the face of a below consensus German IFO, stronger US durable goods and solid US initial jobless claims. But overall, the single currency has been doing a lot of chopping around with no clear directional bias as it floats between the 100-day moving average and some medium-term resistance above 1.1400. Clearly the major pair will be looking for today’s Yellen speech to act as a catalyst for volatility, though US GDP readings, US trade and Michigan confidence should not be overlooked. Earlier, the market was propped a bit on solid German consumer confidence readings.
GBPUSD – technical overview
The market remains confined to an intense downtrend and is in the process of consolidating just off the recent +30-year low from July. Any rallies are classified as corrective ahead of what should be the next major break below 1.2800 and towards 1.2500. Only back above 1.3372 will take the immediate pressure off the downside and force a shift in the structure.
GBPUSD – fundamental overview
An outperforming Pound in recent trade got a bit of a reality check on Thursday, with the UK currency succumbing to pressure, perhaps on profit taking ahead of Yellen’s Jackson Hole speech. Even the stronger UK CBI trends data wasn’t able to help extend Cable’s recovery, though with US durable goods and US initial jobless claims looking healthy, it wasn’t all that surprising to see the Pound give back gains. Looking ahead, aside from the Fed Chair, we also get UK and US GDP prints, along with US trade and Michigan confidence.
USDJPY – technical overview
The latest topside failure sets up a prospective lower top at 102.65 ahead of the next major downside extension below the recent yearly and multi-month low at 98.99. At this point, only a break back above 102.65 would delay this outlook and give reason for pause. Below 99.00 exposes the next major support level in the 95.00 area.
USDJPY – fundamental overview
The Yen has barely nudged this week with the currency taking a rest in lighter August trade, with many participants off the desks on holiday. The currency is also getting pulled in opposing directions which is contributing to the lack of movement, with solid US data and the possibility for a more hawkish Fed getting offset by negative risk implications and a market less confident in the effectiveness of additional BOJ stimulus. Looking ahead, we get the all important Yellen speech from Jackson Hole, along with key US data featuring GDP, trade and Michigan confidence. It’s worth noting BOJ Governor Kuroda is also slated to speak at the Jackson Hole Symposium and any comments from the central banker will also be watched closely.
EURCHF – technical overview
Not much doing here over the past several days, with the market confined to a range trade, roughly between 1.0800 and 1.1000. At this point, a daily close above 1.1000 or back below 1.0800 will be required for clearer directional insight. Until then, look for dips to be supported and rallies well capped.
EURCHF – fundamental overview
SNB smoothing activity to prop the EURCHF rate has been helping to elevate the cross, but at the same time, any upside moves haven’t been sustainable with the cross rate continuing to get sold aggressively into rallies. Overall, this is a market going nowhere right now and it seems sell-stops need to get taken out below 1.0750 or above 1.1000 for clearer insight. US stocks have been supporting EURCHF but are also looking extended which could invite Franc demand if the market starts to roll over from record highs in the sessions ahead.
AUDUSD – technical overview
The market has struggled on rallies above 0.7700 and this suggests the rate could be looking to carve a lower top below the 2016 high at 0.7835 in favour of the next major downside extension. The recent break back below 0.7637 strengthens this outlook and should accelerate declines towards 0.7400 in the sessions ahead. Ultimately, only back above 0.7758 will negate the newly adopted bearish outlook and invite a retest of the 2016 highs.
AUDUSD – fundamental overview
Lack of first tier data out of Australia this week has left the Australian Dollar trading on broader flows which have been less than impressive. Aussie will try and take its cues from the Fed Chair on Friday, though important US data should not be overlooked, with GDP, trade and Michigan confidence due.
USDCAD – technical overview
This market looks to be in the process of carving out a longer-term base off the 1.2461, 2016 low. Look for any additional weakness to be supported ahead of 1.2655 in favour of the next major upside extension towards a measured move objective into the 1.3500-1.4000 area. Ultimately, only back below 1.2655 would delay the constructive outlook.
USDCAD – fundamental overview
Some offsetting flows in Thursday trade ultimately resulted in a flat Canadian Dollar. The Loonie was initially propped on a recovery in the price of OIL but then found renewed offers as headline US durable goods and US initial jobless claims produced solid results. Looking ahead, the main event for the day will be the Fed Chair Yellen speech at Jackson hole, though US GDP readings, US trade and Michigan confidence should not be overlooked. There is no data of note out of Canada today.
NZDUSD – technical overview
Rallies to fresh 2016 highs above 0.7300 have been well capped, with the market looking to adhere to the broader downtrend. As such, look for this latest surge to once again fizzle out, in favour of a resumption of declines. Key support now comes in at 0.7087, but a break below 0.7199 will get things going to the downside.
NZDUSD – fundamental overview
The New Zealand Dollar is sitting up at 2016 highs, with the currency benefitting from less dovish RBNZ Wheeler comments earlier in the week. Interestingly, there hasn’t been a whole lot of pullback despite softer Kiwi trade data, and solid US durable goods and initial jobless claims. It feels like the market is waiting for Yellen today to make a decision on its next big move, though US GDP, trade and Michigan confidence should not be overlooked.
US SPX 500 – technical overview
The market continues to push to fresh record highs and there is scope from here for additional upside in the sessions ahead through next key psychological barriers at 2200. Still overall, the prospect for the formation of a longer-term top is very much alive and any signs of exhaustion and a rolling back over below 2147 in the sessions ahead will strengthen this outlook and invite renewed downside pressure.
US SPX 500 – fundamental overview
Overall, there is a sense that even if the Fed continues to hold off, with monetary policy already exhausted and the limitations of policy being reached, there could be a more intense period of weakness off the recently established record highs over the coming days. Much of investor attention is now on the Jackson Hole Symposium and an anticipated speech from the Fed Chair later today, which could shed further light on the Fed’s monetary policy outlook. Certainly hawkish comments from Fed Fischer earlier this week could be setting the stage for Yellen’s speech, which if confirmed, would add to downside pressure on record high stocks as the reality of a rate hikes this year discourages investors. Also out on Friday is a US GDP reading, US trade and Michigan confidence.
GOLD (SPOT) – technical overview
The recent break above the previous 2015 peak at 1307 strengthens the case for a longer term base with the market confirming a medium-term higher low in the 1200 area, opening the door for the next major upside extension towards a measured move at 1450. Any setbacks should be very well supported ahead of 1300, with only a break below this level to compromise the outlook.
GOLD (SPOT) – fundamental overview
Overall, GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium and longer-term players on the back of fears over the limitations of exhausted monetary policy and extended global equities. All of this will almost certainly continue to keep the commodity in demand, with many market participants fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.
Feature – technical overview
USDTRY has been in the process of correcting off recent record highs. Though setbacks have been significant over the past several days, the price action is still very much classified as corrective, with current setbacks expected to be limited to the 2.9000 area in favour of the next meaningful higher low and bullish resumption. Only a break back below 2.8395 will take immediate pressure off the topside.
Feature – fundamental overview
President Erdogan got more accommodation from his central bank this week but still isn’t satisfied with the degree of policy easing as he continues to call for more rate cuts to help stimulate the local economy. This was a major point of contention with the previous CBRT Governor, though the current Governor is cut more to the mold of Erdogan’s liking. The challenge for the CBRT going forward is to balance the need for stimulatory measures amidst rising inflation. All of this paints a gloomy picture for the Lira going forward, with the currency already battling a recent coup attempt, downgrades from the rating agencies and stress over the EU-Turkey migrant deal. Looking ahead, much of the price action here will hinge on the tone of today’s Fed Chair Yellen speech. Anything hawkish will weigh on the Lira, while anything leaning more dovish could invite demand.