EURUSD remains firm at a yearly high with eyes on Fed Chair Powell’s speech

The Jackson Hole Symposium has spurred cautious optimism among traders who are hoping for indications of lower interest rates from major central bankers. Despite this, mixed PMI data for August and concerns about economic growth in the US and China are clouding the upbeat sentiment. On the other hand, recent mostly positive US data helped the US Dollar recover some of its losses before falling back to sellers.

In this context, the US Dollar Index (DXY) is showing mild intraday losses and is poised to continue its five-week downtrend, hitting its lowest level since December 2023. The US Dollar's weakness has allowed other major currencies and commodities to gain ground. This scenario has positioned EURUSD to potentially extend its four-week uptrend, approaching a 13-month high, although dovish comments from European Central Bank (ECB) officials are putting the Euro bulls to the test. Similarly, GBPUSD remains strong despite mixed domestic data and expectations for lower rates from the Bank of England (BoE).

Meanwhile, USDJPY is struggling to maintain its mid-week rebound, influenced by comments from Bank of Japan (BoJ) Governor Kazuo Ueda and mixed data from Japan. Further, AUDUSD and NZDUSD are preparing for weekly gains despite generally negative domestic data. Moving on, USDCAD is set for a third consecutive weekly loss, supported by a bounce in crude oil prices and the broader weakness of the US Dollar.

Crude oil has not capitalized on the weaker US Dollar, as fears that prolonged higher rates might have undermined the economic stability of major oil-consuming countries linger. Gold, however, is regaining its upward momentum after retreating from record highs over the past two days, with traders gearing up for significant speeches at the Jackson Hole event.

In the cryptocurrency realm, BTCUSD and ETHUSD are both trending towards weekly gains, buoyed by optimism over a potential Republican victory in the upcoming US Presidential elections. Nonetheless, record ETF outflows and net flows on exchanges are creating headwinds for crypto buyers

Following are the latest moves of the key assets:

• WTI Crude oil struggles to defend the previous day’s corrective bounce but pares weekly losses with mild intraday gains around $73.00.
• Gold prints the first daily gain in three around $2,493 by the press time.
• USD Index remains dicey at the lowest level in 2024, mildly offered near 101.40 as we write.
• Wall Street closed with minor losses but the Asia-Pacific shares edged higher. That said equities in Britain and Europe lack clear directions during the initial trading hour.
• BTCUSD and ETHUSD both reverse the previous day’s losses with nearly 1.0% intraday gains to around $60,900 and $2,680 as we write.

US Dollar licks its wounds ahead of Powell’s speech…

On Thursday, the US Dollar Index (DXY) managed its first daily gain in five days, buoyed by positive US data such as the S&P Global Services PMI and largely stable initial jobless claims. This brief respite for the dollar came amid market consolidation ahead of Federal Reserve Chair Jerome Powell's speech. Nonetheless, speculation that Powell might not be able to defend a prolonged period of higher rates, coupled with disappointing US Manufacturing PMIs and early employment data, continues to keep the dollar under pressure. Additional downside pressure on the Greenback is attributed to comments from Fed officials—Collins, Harker, and Schmid—advocating for further rate cuts.

Bank of Japan (BoJ) Governor Kazuo Ueda’s earlier remarks about concerns over a potential US economic slowdown have challenged USD buyers, contributing to weaker USDJPY prices in the foreign exchange market. This was further compounded by an improvement in Japan’s Consumer Price Index (CPI) data for July, which favored yen pair sellers.

The European Central Bank (ECB) also sent dovish signals through its policymakers and recent monetary policy meeting accounts. However, these did not deter EURUSD bulls. The pair faced challenges from slower Eurozone wage growth, weakened consumer confidence, and mixed August PMIs, which tested the resolve of EURUSD buyers.

GBPUSD benefited from positive UK data, including the Services PMI, CBI Trend Total Orders, and steady GfK Consumer Confidence, alongside a softer USD. However, concerns about Bank of England (BoE) Governor Andrew Bailey’s limited ability to sustain higher rates in his upcoming speech pose risks to the Pound.

Meanwhile, AUDUSD and NZDUSD disregarded mostly negative PMI data and weaker New Zealand Q2 Retail Sales, remaining buoyant. USDCAD, however, remains under pressure due to reduced expectations of further rate cuts by the Bank of Canada (BoC) and recent recoveries in crude oil prices.

Crude oil prices are stabilizing despite a potential weekly loss. The softer US Dollar, recent upbeat PMI data from China, and ongoing issues in the Middle East have provided some support. However, concerns about a global economic slowdown and the possibility of increased supply from OPEC+ keep oil sellers hopeful.

Gold continues to attract buyers, driven by technical breakouts, global economic uncertainties, and rising expectations for lower interest rates. Additionally, improving economic conditions in India and recent moves by the Indian government suggest a potential increase in bullion demand from one of the world’s largest consumers.

• Strong Bullish: USDCAD, USDJPY, US Dollar, Silver
• Strong Bearish: AUDUSD, NZDUSD, GBPUSD, GBPJPY
• Bullish: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Bearish: DAX, FTSE 100, EURUSD, Crude Oil

All eyes on the Jackson Hole Symposium…

Given the mixed economic data and clear indications from major central banks favoring lower rates, traders are keenly awaiting statements from top-tier central bankers at the Jackson Hole annual event. This event holds historical significance, notably when former Fed Chair Ben Bernanke announced "helicopter money," which led to significant market volatility. Although such dramatic measures are unlikely from current Fed Chair Jerome Powell, any strong hints of additional rate cuts in 2024—beyond the anticipated September reduction—could further weaken the US Dollar.

For GBPUSD, the focus will be on Bank of England (BoE) Governor Andrew Bailey. He will need to carefully navigate his remarks to defend the current higher rates and push back against expectations of aggressive rate cuts to support the Pound and maintain its strength near the yearly high.

In the currency markets, EURUSD is expected to remain a focus for bullish traders, while USDJPY may see limited further declines. For AUDUSD, NZDUSD, and USDCAD, there might be some pullback in their weekly gains if the US Dollar rebounds following Powell’s comments, though this scenario seems less probable.

Gold is likely to stay attractive to buyers regardless of the outcomes, benefiting from ongoing uncertainties and lower rate expectations. Conversely, Crude Oil will need additional positive catalysts to regain momentum and attract buyers, as it currently requires a boost to reaffirm its position in the market.

May the trading luck be with you!