Daily Market Recap – DXY What to expect from Jackson Hole?

The

renewed risk appetite in a week where most of the focus is on Fed

Chairman Powell's speech in Jackson Hole suggests that the market is not

thinking about an immediate reduction in the asset purchase program

discussed at the Fed's last meeting.

But

can Chairman Powell really move the needle on the tapering debate from

the tone of the minutes that so spooked the markets？ And even if he

does, will it really be a reason to proceed with greenback sales？

It

is unlikely that we will hear any details on the pace or duration of

the interest rate cut as that would have to be agreed upon and announced

at an FOMC meeting. It is likely that Chairman Powell will repeat many

of the comments made in the minutes, including that most FOMC members

favor an announcement on the gradual reduction of the asset purchase

program, depending on macroeconomic data.

The

spread of COVID-19 and recent disappointments in U.S. data may

encourage Powell to emphasize the downside risks to growth and push back

a specific timetable on tapering. After all, according to dollar bears,

even Fed hawk Robert Kaplan recently pointed to these risks as reasons

to delay the adjustment.

At

a time when global growth may be peaking, markets won't want to start

worrying about the U.S. economy. If Powell is too ardent about the

risks, he could cause the dollar to react with a risk-off mode, as we

saw after the disappointing US retail sales and consumer confidence

numbers. Alternatively, if he doesn't give much time to risk and focuse

on the recovery and the merits of monetary policy normalization, the

dollar should also rally.

Dollar

bears may only hold on to their recent gains if Powell can cite the

risks, indicate that there is no need to rush into a monetary adjustment

while remaining optimistic about the U.S. economic outlook.

The

bears need him to pull off this balancing act. As you can see, it is

more likely that the elements are there for a continued rise in the

greenback.

(Chart Source: Tradingview 27.08.2021)

The

dollar is in an uptrend with ascending lows after marking a round

bottom reversal pattern in May and June. The drop at the beginning of

the week is just a breather for now. Above the 20-period moving average

and the last low at 92.42, the rise could resume. Prices may return to

the highs at 93.73 as a first step before making a push for the 2018

September high.

Disclaimer:

This material has been created for information purposes only. All view

expressed in this document are my own and do not necessarily represent

the opinions of any entity.