EUR/USD, USD/JPY Ready for Yellen, Draghi Jackson Hole Speeches
- Below 1.3335, EURUSD is exposed to 1.3095.
- If rejected at 103.85/90, USDJPY needs to hold 103.05/10.
With no Wall Street economists invited to this year's Jackson Hole Economic Policy Symposium, market participants widely expect that the high-minded conference will take on a more academic tone.
Considering that the main focus of the conference is labor market recovery, the context of current times - traders waiting with baited breath for each Nonfarm Payrolls report - there is still significant scope for Fed Chair Yellen's speech to make waves in markets.
With the unemployment rate at 6.2% after having been as low as 6.1% in June, the U3 rate is on track to meet or beat the Fed's expectations. Claims continue to drop, and quit rates are at their highest levels in five years. On the contrary, long-term unemployment an issue and wage growth exceptionally weak.
In conjunction with signs of other major economies starting to flail (all of Europe, Japan) and rising geopolitical concerns that could act as a coolant to risk appetite or even global trade, Chair Yellen is likely to embrace a dovish tone today, highlighting the underutilization of the US labor markets.
US yields have been falling for some time now and the yield curve has undergone quite a bit of flattening this year (the 2s10s spread has narrowed from +264.8-bps on December 31, 2013 to +192.0-bps today), showing the market has fallen in step with the Fed's demands for lower yields for longer.
Any hint of a pivot away from this ultra accommodative stance and towards and accelerated rate hike schedule could easily spook the markets.
See the technical video for considerations specifically for EURUSD, USDJPY, and USDCAD.
--- Written by Christopher Vecchio, Currency Strategist
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