- Dollar: Just How Market Moving will the Jackson Hole Event Be?
- Euro-Area Prone to Financial Panic as Seen in DAX Speculative Plummet
- Japanese Yen and Swiss Franc: Where Do the Safe Havens Fit In?
- Gold Volatility Not Likely to Ease as Investors Judge the Fiats
- Australian Dollar Steady Despite RBA Stevens Dovish Talk
- British Pound Faces its Own Growth, Financial and Policy Troubles
- Canadian Dollar May Draw More Comparisons to the USD than Comm Bloc
Dollar: Just How Market Moving will the Jackson Hole Event Be?
In the calm before major fundamental releases, investors usually retrench and fortify themselves for volatility – much like in the preparation for a storm. And, so it is that we are facing both tremendous event risk in the week-end Jackson Hole Symposium at the same time Hurricane Irene is bearing down on New York City. That said, we have seen volatility trends hold remarkably elevated while the greenback has managed a brief burst to new highs for the week (a move which was reflected in risk aversion spelled out in the S&P 500’s stumble). This departure from the usual conventions of retrenchment before a volatility-inducing event speaks to the importance of this particular affair and the otherwise heavy fundamental debate just behind the veil of the top headlines. We need to breakdown the tremendous potential in this upcoming event risk and look beyond the immediate, short-term speculation it is bound to stir.
The first question on everyone’s mind is whether Fed Chairman through Friday will announce a third quantitative easing regime (QE3). To begin with, it is unlikely that the central banker will use that particular terminology as it comes with negative connotations of moral hazard and speculative activity. More specifically, we are waiting to see whether there is any mention of further programs aimed at improving the functioning of struggling markets / assets, fortify liquidity or boost growth (which may come in the guess of boosting asset values as a first step). Policymakers have seen a swell of news to support just such an expansive move. The US economy has shifted gears back into neutral with labor markets long struggling to regain traction leading to a drop in consumer spending. And, from the financial side, European funding problems are spilling over to the US with Bank of America under constant scrutiny for its health (with Berkshire Hathaway founder Warren Buffet’s recently announced $5 billion investment only furthering that case).
Many will look only to the question of whether further stimulus is being pursued or not and move. Certainly, further asset or Treasury purchases would immediately work to boost speculative interests and further devalue the US dollar. Alternatively, the cold shoulder on further support could revive the bearish sentiment that has recently turned to uneasy congestion due to pure uncertainty about the future. However, we need to look beyond the immediate reaction. A very important consideration to remember is that the market is exceptionally volatile and inherently skeptical of the future. That means initial optimism could quickly cave. Furthermore, ECB President Trichet is in attendance at the Wyoming meeting is expected to speak on Wednesday. Officials know that conditions are worse in the Euro-area; so perhaps a coordinated effort will be discussed.
Related:Discuss the Dollar in the DailyFX Forum, John’s Video: US Dollar and S&P 500 Ready for Jackson Hole-Based Breakouts
Euro-Area Prone to Financial Panic as Seen in DAX Speculative Plummet
It is easy to tune out everything but the US dollar with the upcoming event risk; but it is imperative to remember the other fundamental troubles that persist around the world. Additional stimulus from the Fed is just as much about stabilizing global financial conditions as it is the domestic environment. And, on that point, we are reminded that the second Greek bailout is in jeopardy as EU members debate withdrawing their support while the banking system is facing unprecedented pressure (as reflected in the sector’s record credit default swap levels). Yet, to this point, the market has been able to turn a blind eye to consistent troubles – concerning themselves with only active deterioration. That may be changing. In this past session, the mere rumor of Germany facing a downgrade from its top rating sent the DAX Index plunging 4 percent in 15 minutes.
Japanese Yen and Swiss Franc: Where Do the Safe Havens Fit In?
Considering we are heading into major event risk, it is reasonable to consider whether the yen and franc are ideal counterpoints to the headlines. In overwhelming moves, the currencies will certainly fall back to their traditional roles; but we should remember that both policy authorities are actively fighting appreciation. Furthermore, the franc is more appropriately a euro alternative and the yen an anti-carry draw.
Gold Volatility Not Likely to Ease as Investors Judge the Fiats
Given the difficulty in establishing which currencies are safe havens and which are high risk; it is easy to lose sight of the bigger picture question – what is the outlook for the global market’s health and the fiat currency in general. It is a difficult read within currencies; but we can pull an easier read from gold – the anti-currency. A move away from financial and fiscal troubles in general will play directly into gold’s hands.
Australian Dollar Steady Despite RBA Stevens Dovish Talk
It’s a sign of the times when a formerly hawkish policy official confirms his speculated dovish turn and the market provides little reaction. The Australian dollar was little moved after RBA Governor Stevens noted in testimony to Parliament that he sees moderation in Australian demand and Chinese growth, growing trouble in global financial conditions and inflation holding well below 3 percent in the upcoming quarterly read.
British Pound Faces its Own Growth, Financial and Policy Troubles
Should things start moving (risk on or risk off), where does the pound fit into the scheme? Since the worry is more directly to the negative-dollar implications should stimulus expand or positive-euro consequences should the Fed join the fire fight, the sterling will draw its correlation to the Euro-region’s health. On the other hand, we need to think how deteriorating conditions could encourage the BoE to seriously consider stimulus.
Canadian Dollar May Draw More Comparisons to the USD than Comm Bloc
In the scheme of dollar-based majors, EURUSD is a unique player as it really highlights the liquidity in the pair and the financial troubles between the two powerhouse economies. That said, USDCAD is perhaps even more exceptional as growth, financial issues and policy approach between the US and Canada see even greater segregation. Here, the focus truly is the health of the greenback.
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**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
|
GMT |
Currency |
Release |
Survey |
Previous |
Comments |
|
23:30 |
JPY |
Tokyo Consumer Price Index (YoY) (AUG) |
-0.2% |
0.5% |
Inflation figures are seen dropping back to negative territory – a familiar position for prices in an economy that has faced nearly two decades of financial pain and near-zero interest rate policy. Still the perfect funding currency |
|
23:30 |
JPY |
Tokyo CPI Ex-Fresh Food (YoY) (AUG) |
-0.1% |
0.4% |
|
|
23:30 |
JPY |
Tokyo CPI Ex Food, Energy (YoY) (AUG) |
-0.6% |
0.3% |
|
|
23:30 |
JPY |
National CPI (YoY) (JUL) |
0.0% |
0.2% |
|
|
23:30 |
JPY |
National CPI Ex-Fresh Food (YoY) (JUL) |
-0.1% |
0.4% |
|
|
23:30 |
JPY |
National CPI Ex Food, Energy (YoY) (JUL) |
-0.6% |
0.1% |
|
|
8:00 |
EUR |
Euro-Zone M3 s.a. (3M) (JUL) |
2.3% |
2.2% |
The favored inflation figure for policy officials – is there a hawkish argument left? |
|
8:00 |
EUR |
Euro-Zone M3 s.a. (YoY) (JUL) |
2.2% |
2.1% |
|
|
8:30 |
GBP |
Gross Domestic Product (QoQ) (2Q P) |
0.2% |
0.2% |
Details from the GDP figures will be closely scrutinized as market participants look for evidence that the Bank of England will pursue further stimulus |
|
8:30 |
GBP |
Gross Domestic Product (YoY) (2Q P) |
0.7% |
0.7% |
|
|
8:30 |
GBP |
Index of Services (MoM) (JUN) |
-0.1% |
1.6% |
|
|
8:30 |
GBP |
Index of Services (3Mo3M) (JUN) |
0.5% |
1.2% |
|
|
9:30 |
CHF |
KOF Swiss Leading Indicator (AUG) |
1.80 |
2.04 |
A growth indicator composite, the downturn in the EU is likely to be contagious |
|
12:30 |
USD |
Gross Domestic Product (Annualized) (2Q S) |
1.1% |
1.3% |
Very modest revisions are expected according to the consensus. Look for meaningful deviations from these projections to generate growth speculation |
|
12:30 |
USD |
Personal Consumption (2Q S) |
0.2% |
0.1% |
|
|
12:30 |
USD |
Gross Domestic Product Price Index (2Q S) |
2.3% |
2.3% |
|
|
12:30 |
USD |
Core PCE (QoQ) (2Q S) |
2.1% |
2.1% |
|
|
13:55 |
USD |
U. of Michigan Confidence (AUG F) |
55.8 |
54.9 |
A final reading of consumer confidence will be swept up in bigger event risk |
|
2:00 (SAT) |
CNY |
Industrial Profits (YTD) (YoY) (JUL) |
28.7% |
China is an important engine for not only the Asian world but for Europe as well, factory profits are increasingly important |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
23:30 |
AUD |
RBA Governor Glenn Stevens Testifies in Front of House Panel |
|
14:00 |
USD |
Fed Chairman Ben Bernanke Speaks at Jackson Hole Conference |
|
16:25 |
EUR |
ECB President Jean-Claude Trichet Speaks at Jackson Hole Conference |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.5160 |
1.6745 |
86.00 |
0.8275 |
1.0275 |
1.0800 |
0.9020 |
118.00 |
146.05 |
|
Resist 1 |
1.5000 |
1.6600 |
81.50 |
0.8000 |
1.0000 |
1.0645 |
0.8750 |
113.50 |
140.00 |
|
Spot |
1.4377 |
1.6286 |
77.39 |
0.7938 |
0.9879 |
1.0445 |
0.8305 |
111.26 |
126.04 |
|
Support 1 |
1.4000 |
1.5935 |
76.35 |
0.7000 |
0.9425 |
1.0400 |
0.7745 |
109.00 |
124.00 |
|
Support 2 |
1.3700 |
1.5750 |
75.50 |
0.6800 |
0.9055 |
0.9925 |
0.6850 |
106.00 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
13.8500 |
1.8235 |
7.4025 |
7.8165 |
1.3650 |
Resist 2 |
7.5800 |
5.6625 |
6.1150 |
|
Resist 1 |
12.5000 |
1.8000 |
7.3500 |
7.8075 |
1.3250 |
Resist 1 |
6.5175 |
5.3100 |
5.7075 |
|
Spot |
12.4996 |
1.7554 |
7.2323 |
7.7957 |
1.2108 |
Spot |
6.3306 |
5.1815 |
5.4233 |
|
Support 1 |
11.5200 |
1.6500 |
6.5575 |
7.7490 |
1.2000 |
Support 1 |
6.0800 |
5.1050 |
5.3040 |
|
Support 2 |
11.4400 |
1.5725 |
6.4295 |
7.7450 |
1.1800 |
Support 2 |
5.8085 |
4.9115 |
4.9410 |
INTRA-DAY PIVOT POINTS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.4540 |
1.6451 |
78.17 |
0.8025 |
0.9949 |
1.0550 |
0.8370 |
112.21 |
126.91 |
|
Resist 1 |
1.4459 |
1.6368 |
77.78 |
0.7981 |
0.9914 |
1.0498 |
0.8337 |
111.74 |
126.47 |
|
Pivot |
1.4393 |
1.6315 |
77.31 |
0.7946 |
0.9853 |
1.0460 |
0.8298 |
111.17 |
126.11 |
|
Support 1 |
1.4312 |
1.6232 |
76.92 |
0.7902 |
0.9818 |
1.0408 |
0.8265 |
110.70 |
125.68 |
|
Support 2 |
1.4246 |
1.6179 |
76.45 |
0.7867 |
0.9757 |
1.0370 |
0.8226 |
110.13 |
125.32 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.4580 |
1.6467 |
78.32 |
0.8065 |
0.9992 |
1.0619 |
0.8452 |
113.07 |
127.83 |
|
Resist. 2 |
1.4529 |
1.6421 |
78.08 |
0.8033 |
0.9964 |
1.0576 |
0.8415 |
112.62 |
127.38 |
|
Resist. 1 |
1.4478 |
1.6376 |
77.85 |
0.8001 |
0.9936 |
1.0532 |
0.8379 |
112.17 |
126.93 |
|
Spot |
1.4377 |
1.6286 |
77.39 |
0.7938 |
0.9879 |
1.0445 |
0.8305 |
111.26 |
126.04 |
|
Support 1 |
1.4276 |
1.6196 |
76.93 |
0.7875 |
0.9822 |
1.0358 |
0.8231 |
110.35 |
125.14 |
|
Support 2 |
1.4225 |
1.6151 |
76.70 |
0.7843 |
0.9794 |
1.0314 |
0.8195 |
109.90 |
124.69 |
|
Support 3 |
1.4174 |
1.6105 |
76.46 |
0.7811 |
0.9766 |
1.0271 |
0.8158 |
109.45 |
124.24 |
v
Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com
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