How to trade the Jackson Hole symposium – EUR/USD Forecast

How to trade the Jackson Hole symposium

(Giles Coghlan LLB, Lth, MA – HYCM)

The run-up to the Jackson Hole Symposium has been one in which yields have been rising, stocks selling, and the dollar surging. Why? On expectations that the Federal Reserve is going to need to be more aggressive in its rate stance. After the end of July’s meeting the Fed prompted a move higher in stocks, a drop in the USD, and a move lower in yields as the market saw them as taking a dovish stance in moving to a meeting by meeting basis.

The expectations are that Jackson’s Hole meeting will see a hawkish Powell who stresses the need for the Fed to tackle inflation as priority number one.

The opportunity

The best opportunity would come if Jerome Powell takes a more dovish stance and disappoints markets. The best markets to express a dovish Powell would most likely be silver and the EURUSD. The gold/silver ratio has been moving steadily higher.

Gold would also stand to benefit from a dovish Powell as yields and the USD would likely move lower. The EURUSD is a different way of expressing dollar weakness. So, with the DXY’s 60% EUR weighting, we would reasonably expect a weak USD to send the EURUSD pair higher.

Other options JPY’s pairs

A couple of other options could be selling the GBPJPY and the EURJPY. Both the GBP and the EUR have reasons for weakness. The UK is rushing towards a recession and the eurozone is increasingly likely to enter one. A dovish Powell should send the US10Y yield lower and this should strengthen the JPY. Therefore, watch out for any EURJPY and GBPJPY selling on a dovish Powell.

EUR/USD: The euro resists, but for how long?

(Vasilis Tsaprounis – TopFX)

Signs of recovery for the common European currency as it managed to return to the level of 1/1 after the lows of 0,9900.

As we mentioned in the previous article we expected this reaction with increased probability.

As the announcements of the economic data in the last two days showed, the reflection on the course of the economy is not only in the European continent but also in the American one and this seems to be holding back at present the further huge fall of the euro.

Manufacturing activity in the United States and new home sales show signs of slowing while only durable goods orders were reported slightly better than expected.

On the other hand, the latest figures that have been announced from the side of the eurozone certainly show some slowdown , but they have not disappointed beyond expectations.

For example the latest figures announced earlier in the morning for the German economy showed the growth path to remain in positive territory with slightly improved estimates and the business confidence clima was announced within expected without some fresh disapointment.

Now the market awaits with great interest the continuation of the day and the Jackson Hole Symposium.

As now the policy followed by the central banks is the main cause of the formation of the exchange rate the market awaits with interest possible new signals about the future intentions of the Fed.

Without any significant surprise in the announcements we would expect increased volatility today But without the breaking of important levels with an likely range trading in the levels 0.9900-1.0070.

The buy on dips strategy remains my favorite as it has not let me down so far and the reactions of the Euro are quite faithful.

EUR/USD Forecast: Parity proves to be a tough resistance to crack

(Eren Sengezer – FXStreet)

– EUR/USD has lost its bullish momentum after having advanced above parity.

– Germany’s IFO says a recession in Germany is still on the cards.

– US Bureau of Economic Analysis will release its second estimate of the Q2 GDP growth.

After having failed to reclaim in the previous two trading days, EUR/USD has gathered bullish momentum and climbed to a daily high of 1.0033 early Thursday. The pair, however, seems to be having a difficult time extending its rebound.

The positive shift witnessed in risk sentiment helped the shared currency find demand on Thursday. With China introducing drastic measures to boost the economy, major Asian equity indices recorded strong daily gains and European stocks opened decisively higher. Additionally, US stock index futures were last seen rising between 0.7% and 1%, suggesting that risk flows could continue to dominate the financial markets in the second half of the day.

Meanwhile, Germany’s Destatis announced earlier in the day that the annualized Gross Domestic Product (GDP) growth for the second quarter got revised higher to 1.8% from the flash estimate of 1.5%.

Other data from Germany showed that the IFO Business Climate Index edged lower to 88.5 in August from 88.7 in July. On a concerning note, IFO Economist Klaus Wohlrabe said that a recession in Germany was still on the cards and added that they were expecting the GDP to contract by 0.5% in the third quarter. While investors assess these comments, EUR/USD consolidates its daily gains at around parity.

In the second half of the day, the US Bureau of Economic Analysis (BEA) will release its second estimate of the second-quarter GDP growth. Markets expect the BEA to revise the Q2 growth to -0.8% from the initial estimate of -0.9%. Unless there is a bigger-than-expected revision, the dollar is unlikely to react to this data. The US Department of Labor will publish its weekly Initial Jobless Claims data as well later in the session.

It’s worth noting that central bankers could give interviews on the sidelines of the Jackson Hole Symposium during the American trading hours. Ahead of FOMC Chairman Jerome Powell’s speech on Friday, market participants will pay close attention to Fed policymakers’ remarks.

EUR/USD Technical Analysis

On the four-hour chart, the Relative Strength Index (RSI) indicator recovered to 50, suggesting that sellers refrain from committing to additional losses for the time being. Moreover, EUR/USD broke above the descending regression channel coming from August 12 and the last four-hour candles closed above the 20-period SMA, pointing to a bullish shift in the near-term outlook.

In case the pair manages to hold above parity and starts using that level as support, 1.0020 (Fibonacci 23.6% retracement of the latest downtrend) aligns as immediate resistance ahead of 1.0060 (50-period SMA) and 1.0080 (Fibonacci 38.2% retracement).

On the downside, a four-hour close below parity could open the door for an extended slide toward 0.9960 (20-period SMA) and 0.9920 (end-point of the downtrend).

Read What will happen at the Jackson Hole Symposium?