Jackson Hole Symposium Preview: Powell To Down the Dollar?

All eyes on the Fed. Is a policy change to ATI on the cards?

FED 10

Rather than meeting at Jackson Hole, the Wyoming ski resort, the coronavirus pandemic has forced the congregation of central bankers, policymakers and finance minister to go virtual. 

The Fed hosted meeting where major players discuss the issues facing global economies will be an online affair on Thursday 27th & 28th August.
Virtual or not, the markets will be watching regardless, the US Dollar, the Dow and Gold often experience heightened volatility around the event.

This year’s monetary policy symposium on the topic of “Navigating the Decade Ahead: The Implications of Monetary Policy” comes against of backdrop of unprecedented monetary policy intervention, to cushion economies from the devastating impact of the coronavirus pandemic. It also comes towards the end of the Fed’s nearly two-year policy review.

All Eyes on Powell
All eyes are on Federal Reserve Chair Jerome Powell’s keynote address due 2:10pm (UK time). The Fed Chair is expected to pre-announce the findings of the Monetary Policy Framework review, a review of the Fed’s policies and practices to deal with the “new normal” which is slow global growth, low inflation and low interest rates. 

ATI Chatter
If Jerome Powell were to talk about average inflation and the adoption of Average Inflation Targeting (ATI) traders will be sure to take note. 

ATI is important because it will mean a change in policy from a firm inflation target to one which permits an overshoot over time. This would be a hint to the market that the US central bank would allow inflation to stay above 2% for a while, essentially meaning that interest rates will stay lower for longer. 

Such an announcement would be a big deal but not necessarily be a huge surprise. It may not be fully priced in either. In that case we could see the dollar dive lower, Gold rebound after falling away from its all-time high and US stocks continue climbing.

The EUR/USD trades -0.15% on Wednesday, with little change ahead of Jerome Powell’s speech at Jackson Hole. The pair is trading at 1.1815, towards the upper end of the daily traded range of $1.1772 - $1.1839. 
On the four-hour chart, the price trades below the 50 sma and 100 sma suggesting more weakness could be on the cards. Although it trades above its ascending trendline and 200 sma.
Immediate support can be seen at $1.1750, a break through here could open the door to $1.17. Resistance can be seen at $1.1825 &$1.1850 (50 & 100 SMA) and $1.1885.

Build your confidence risk free

More from DXY

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.