The dollar fell initially on Powell’s speech, but then quickly pared losses and started to strengthen across the board. However, the gains were also limited since the market had already priced in the shift in monetary policy, which, in the long term can be expected to weaken the dollar. In the upshot, the price action stabilized near the balance line at 1.1822 by the end of the day.
Today’s macro agenda (GMT 3)
12:00 Eurozone: consumer confidence, economic sentiment, industrial sentiment, and services sentiment (August)
15:30 Canada: GDP (June), US: personal income and spending (July)
16:05 UK: BoE governor Andrew Bailey speech
16:45 US: Chicago PMI (August); University of Michigan consumer expectations (August)
20:00 US: Baker Hughes weekly oil rig count; the Jackson Hole symposium continues
The euro recovered to 1.1888 in Asian trading this morning. Asian traders were out of the picture by the time the Fed show got under way last evening, so they opted largely for a repeat performance of yesterday’s trend. In line with our forecast, the key pair will climb to 112th degree of the Gann angle, then fall back to the balance line.
Yesterday's trading range was 137 points. Given that the price in this daily range exceeded 400 points on the back of sharp fluctuations, buyers can’t go on much further without reverting to a correction. A good starting place would be to hover around the balance line for a couple of days. Going forward, our baseline scenario predicts a greater likelihood of a pullback rather than upward movement.