How the dollar could respond to Fed Chairman Powell's speech in Jackson Hole

New York stock market computer charts
A trader gestures on his screen on the floor of the New York Stock Exchange in New York, October 15, 2014.
REUTERS / Lucas Jackson

Friday was all about the Fed Chair Jackson Hole speech at 10 AM ET, but from a market perspective we may want to keep a close eye on the USD response to what Powell says or does not say. Why? The strength of Thursday in the Dollar changed overnight at the Friday pre-market session.

In our Thursday afternoon discussion on the USD, I said the following about the USD: "The $ 64,000 question about gold and the gold mines depends on the direction of the USD: was the recent decline in DXY the beginning of a period of weakness or a completed correction? "

Considering the weakness of Friday morning in the DXY, the strength in EUR and CNH versus the USD (see attached charts), the price action, pattern formation and momentum differences of the Dollar strongly suggest that the Dollar turns into a period of weakness.

In particular, the enormously divergent relationship on the USD vx showed. The Chinese renminbi card has my imagination in fifth gear because it appears to be an acute turning point for a ruthless USD upmove (a period of acute depreciation of the renminbi against the dollar) to a potentially powerful correction (period of weakness in the USD).

Whether the "turnaround moment" is a sudden solution to the American-Chinese trade / tariff stalemate, or the emergence of some form of FX market intervention to weaken the Dollar, I do not know.

Nonetheless, the BIG Picture Chart work warns us that something is rumbling under the surface that can affect the price of the Dollar, and with it tangible markets such as raw materials, American exporters and precious metal miners.

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