News & Analysis at your fingertips.

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. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • CTV projects Trudeau wins his third term as Canada's Prime Minister - BBG
  • Do you know how to properly Identify a double top formation? Double tops can enhance technical analysis when trading both forex or stocks, making the pattern highly versatile in nature. Learn more about the double top formation here: https://t.co/t9FlspUVZz https://t.co/KY6MiOC9Y6
  • US House Speaker Pelosi says top-line spending number may change but hopes for $3.5 trillion in spending bill - BBG
  • RBA Minutes: - Board committed to providing high level of monetary support - Q3 GDP expected to decline materially - Central scenario is rates on hold until 2024 - BBG $AUDUSD
  • Heads Up:🇦🇺 RBA Meeting Minutes due at 01:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2021-09-21
  • New Zealand reports 14 new local Covid cases - BBG
  • I had a chance to talk with @tastytradeRyan and @victorJ0NES about Evergrande and its impact on US markets — always great talking with these two guys on Mondays. https://t.co/vddTknnPWC
  • RT @cheddar: Stocks dropped the most since May on Monday, sending shockwaves through Wall Street. @CVecchioFX explains the global impact of…
  • The Spinning Top candlestick pattern forms part of the vast Japanese candlestick repertoire with its own distinct features. Gain a better understanding of the spinning top candlestick here: https://t.co/DWm7cBMUg9 https://t.co/EegiwWMe9V
  • There are three major forex trading sessions which comprise the 24-hour market: the London session, the US session and the Asian session. Learn about the characteristics of each session here: https://t.co/reRmDdK93P https://t.co/ZE0Hgn9PCM
US Dollar Outlook: Fed Taper Talk at Jackson Hole is Key

US Dollar Outlook: Fed Taper Talk at Jackson Hole is Key

Rich Dvorak, Analyst

US DOLLAR OUTLOOK: DXY INDEX PARES GAINS AHEAD OF FED SYMPOSIUM

  • US Dollar price action has weakened broadly over the last few trading sessions
  • DXY Index down -0.9% since last Friday’s swing high as bears fade recent strength
  • Fed taper talk at the Jackson Hole Symposium presents noteworthy volatility risk

US Dollar bears have been in the driver’s seat and steered the broader DXY Index nearly -1.0% lower since Friday. This appears to follow a deterioration in economic data and global growth outlook, which could be enough for the Federal Reserve to delay an announcement of a timeline for tapering asset purchases.

With markets walking back expectations that the Fed might use its annual Jackson Hole Symposium as a platform for outlining what the taper timeline might look like, it comes as little surprise that the US Dollar has pared recent gains. Broad-based selling pressure across USD price action could continue if FOMC officials remain cautious with their guidance owing to the delta variant of COVID-19 and its potential to derail the economic recovery.

DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (13 MAY TO AUGUST 25 2021)

DXY Chart

Chart by @RichDvorakFX created using TradingView

That said, the latest US Dollar pullback does leave the DXY Index at an interesting technical support level headed into Jackson Hole event risk. The DXY Index currently trades around the 92.80-price level, which is roughly underpinned by its 20-day simple moving average and 23.6% Fibonacci retracement level of the latest bullish leg. An ascending trendline connecting the 09 June and 04 August swing also highlights this potential area of buoyancy.

Due to accelerating downward momentum and the broader US Dollar weakening for the last four consecutive trading sessions, however, a bearish MACD crossover has formed. This suggests the US Dollar remains vulnerable to an extended reversal lower, and in turn, could see US Dollar bears set their sights on the bottom Bollinger Band. On the other hand, if the Fed catches markets offside with a taper announcement at Jackson Hole, there would likely be an influx of US Dollar strength that brings year-to-date highs back into focus.

USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

US Dollar Outlook: Fed Taper Talk at Jackson Hole is Key

As such, US Dollar implied volatility readings have ticked higher to reflect event risk that surrounds the Jackson Hole Symposium set for kickoff on Thursday, 26 August. Traders will likely be on the edge of their seats trying to gauge the relatively hawkish or dovish lean conveyed by FOMC officials, like St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan, who are due to speak tomorrow. Nevertheless, it may be more prudent to await commentary from Federal Reserve Chair Powell during his speech on economic outlook scheduled for Friday, 27 August at 14:00 GMT before committing to a longer-term directional bias for the US Dollar.

Keep Reading – Gold Price Outlook: XAU/USD Mired by Fed Symposium Risk

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

DISCLOSURES