All Eyes on Powell
Ahead of Fed chairman Powell speech at the Jackson Hole Symposium later today, market expectations are leaning broadly in favour of a hawkish outcome. On the back of a hawkish set of July FOMC minutes and following hawkish commentary from other Fed members at the end of last week and yesterday, traders are expecting Powell to reiterate the Fed’s core message of pushing ahead with rate hikes until inflation is back at target.
However, given that this message is baked into price action here, the bigger focus will likely be on Powell’s outlook for next year. The market is already anticipating a Fed slowdown on rates as inflation moderates into next year. The key thing here will be timing. If Powell is seen forecasting a quicker end to the current inflationary peak (and thus a quicker end to tightening), this will no doubt fuel a USD sell-off. Alternatively, if the Fed sticks to a view of inflation staying at elevated levels for longer, this should keep USD demand intact near-term.
Where to Trade Jackson Hole?
AUDUSD
The Aussie has been the strongest beneficiary of the recent patch of USD weakness and risk-on trading. If USD weakens on the back of today’s event, AUDUSD looks well poised to advance higher. The pair is currently carving out a potential inverse head and shoulders pattern. As such, bulls can look for a break of .7132 targeting .7278 initially and .7564 as a longer-term target.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.