We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bearish
Gold
Bullish
Oil - US Crude
Bullish
Bitcoin
Bullish
More View more
Real Time News
  • RT @C_Barraud: 🇪🇺 🇫🇷 *EU ASKS #FRANCE FOR CLARIFICATIONS ON 2020 BUDGET - BBG *EU SAYS FRANCE'S 2020 BUDGET PLANS SEEM IN BREACH OF RULES
  • BBC Political Editor says there is possibly as many as 30 Labour rebels that would back second reading $GBP
  • $USDCAD catching at trendline support https://t.co/e9ya7n8HQR
  • What is the status of the $USD as the world's reserve currency, and where is #Brexit heading? Find out from @IG_US CEO Rupert Osborne, only on Trading Global Markets Decoded #podcast episode here: https://t.co/wnEQUhB0v9 https://t.co/1Hx42UvdAp
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.11%, while traders in US 500 are at opposite extremes with 76.46%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/JwZoWai85y
  • LIVE NOW: Join Analyst and Editor @MartinSEssex as he discusses the most important events and themes that have driven market sentiment and will drive it in the days ahead. Register here: https://www.dailyfx.com/webinars/181540619?utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • Commodities Update: As of 10:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.54% Silver: 0.45% Gold: 0.22% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/wVPqMhDmYC
  • Coming up at half past the hour: my weekly webinar on market #sentiment. Please join me if you can. You can sign up here: https://www.dailyfx.com/webinars?ref-author=essex
  • Forex Update: As of 10:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.12% 🇨🇦CAD: 0.04% 🇯🇵JPY: 0.04% 🇦🇺AUD: -0.13% 🇬🇧GBP: -0.15% 🇨🇭CHF: -0.29% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/DtH53waOtP
  • The break of 97 on DXY opens the door to 94.60 https://www.dailyfx.com/forex/video/live_events/2019/10/21/EURUSD-drives-higher-on-weaker-USD-JWweb-121.html
DXY Index Threatens Key Break after Powell's Jackson Hole Speech

DXY Index Threatens Key Break after Powell's Jackson Hole Speech

2018-08-24 17:00:00
Christopher Vecchio, CFA, Sr. Currency Strategist
Share:

Talking Points:

- The US Dollar found no reprieve in Fed Chair Jerome Powell's speech at the Jackson Hole Economic Policy Symposium.

- The soft price action around Fed Chair Powell's speech is another sign that the US Dollar is likely topping out in the short-term.

- Retail traders are net-short EUR/USD and USD/JPY, positive signs for risk appetite.

See our longer-term forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides

The US Dollar (via the DXY Index) is closing in on its lows of the week established on Wednesday as traders are heading into the weekend disappointed by what they've heard so far at the Jackson Hole Economic Policy Symposium. As a result, the DXY Index may be poised to break trendline support going back to the late-April swing lows.

Fed Chair Jerome Powell's speech at the Jackson Hole Economic Policy Symposium provided no support for the US Dollar as he noted that the gradual pace of rate hikes remains appropriate, leaving market pricing unchanged for the timeline of when the Fed will move next.

Noting that the economy's "strong performance will continue" against a backdrop where there "does not seem to be elevated risk of overheating," Fed Chair Powell said that the "gradual process of normalization remains appropriate." For now, this means a 25-bps rate hike at meetings in which a new Summary of Economic Projections is produced.

Federal Reserve Rate Hike Expectations (August 24, 2018) (Table 1)

DXY Index Threatens Key Break after Powell's Jackson Hole Speech

Currently, Fed funds futures are pricing in a 95% chance of a 25-bps rate hike in September, and a 64% chance of another hike in December (bringing the total to four 25-bps hikes in 2018). Beyond that, however, rates markets aren't pricing in another move until June 2019.

Today's price action in the DXY Index surrounding Fed Chair Powell's speech is another piece of evidence in the case for the US Dollar topping out. Rates markets can't get more aggressive than they already are for the September meeting, essentially saying that this bullish driver has been exhausted.

DXY Index Price Chart: Daily Timeframe (June 2017 to August 2018) (Chart 1)

DXY Index Threatens Key Break after Powell's Jackson Hole Speech

As we suggested a few days ago, there is ample reason to believe that the US Dollar is topping out in the near-term from the technical perspective as well. The false breakout that materialized in July and August has now pushed prices below the rising trendline going back to the late-April swing low. At the same time, price is now trading below its daily 8-, 13-, and 21-EMA envelope, while both daily MACD and Slow Stochastics have continued to turn lower.

The most obvious beneficiary of a DXY Index pullback is EUR/USD, constituting 57.6% of the overall index. But amidst a DXY breakdown, one pair that might not participate is USD/JPY, which retains upside appeal in an environment where risk appetite is improving (the S&P 500 and the Nasdaq both hit all-time intraday highs earlier).

Read more: Gold Price Mired in Downtrend - Key Levels to Watch

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.