Dollar Steadies As Fed Gears Up For Its Jackson Hole Conference
Jackson Hole Symposium Moves Online as Delta Threat Is Rearing Its Ugly Head
by Bogdan Giulvezan
Last Friday the US Dollar reached a 9-month high against the Euro but on Monday it slipped against its major peers, including the single currency, and allowed the EUR/USD to climb back above the key level at 1.1700.
The delta variant of the COVID-19 virus and its impact on the recovery of the Eurozone economy is boosting the safe-haven status of the US Dollar but may also affect the Fed’s decision to taper its stimulus plan.
Due to rising delta variant cases, the Fed decided to move its annual Jackson Hole Symposium in an online environment but its importance remains paramount because the event is traditionally eyed for hints on future monetary stance changes. And considering that Fed Chair Powel will speak at the symposium, traders around the world are expecting some sort of guidance or clues about the possible tapering of the current monetary stimulus program or even the timing of the rate hike.
Key Events for the Week Ahead
Earlier today, Germany released its Manufacturing and Services PMIs, which showed mixed readings, with the former coming below expectations, while the latter posted a small increase. The data did not have a major impact on the market but the EUR/USD pair is edging higher, continuing a retracement started Friday.
Later today, at 1:45 pm GMT, the U.S. Manufacturing and Services PMIs will be released, showing the opinions of purchasing managers about overall business conditions in the respective sectors but unless the reading show major discrepancies between actual and forecast, the impact will be limited.
The U.S. Preliminary GDP will come out Thursday, August 26 at 12:30 pm GMT, showing the change in the value of all services and goods produced by the economy. The release can move the dollar charts but the Prelim version tends to have a lower impact than the Advance, which was already released. The forecast is 6.6%, a small increase from the previous 6.5%.
The Jackson Hole Symposium starts Thursday and will continue throughout Friday and Saturday. Probably the highlight will be Fed Chair Powell’s speech at the symposium, scheduled for Friday at 2:00 pm GMT. If we will get any hints on stimulus tapering, expect the charts to react strongly.
Technical Outlook – EUR/USD
The pair is currently trading at 1.1725 after reaching a low at 1.1664 late last week. It’s common for price to climb above a recently broken level, but the way it behaves afterward will determine whether it was a false break or a real one.
The overall bias is bearish, with the Dollar mainly in control, and the Relative Strength Index is not oversold, thus the pair has room to descend more, possibly into the support at 1.1615 – 1.1600. Any upside moves should be capped by the resistance at 1.1780, considering that by the time price gets there, the 50 days MA will probably move into that area, thus giving it more strength as resistance. A break of the said area would indicate that the recent break of support was false and that higher prices may follow.
