WHY TO EXPECT VOLATILITY AHEAD AND POST JACKSON HOLE SYMPOSIUM?
reasons to again expect a retest of 1.1800 at risk of breaking out above to 1.1850?
1- House adopted a $3.5 trillion budget resolution that advances his economic agenda. Already passed by the Senate, the bill now goes to committees that will write the details into tax and spending legislation that both chambers will vote on later this year. The agreement end a standoff that threatened to stall the party's domestic agenda, including the bipartisan $550 billion infrastructure deal.
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legislating the budget means more fiscal support to the economy, that raises the expectations of a longer term dovish Fed, in order to keep the benefits of that support and push economic recovery higher, as well as spending which is USD negative even if tapering asset purchases takes place by end of the year, OR in other words, tapering asset purchases + more fiscal support (3.5T budget) at the same time = stable dollar (NO USD UP , NO USD DOWN), only down in case tapering gets delayed (EYES ON JACKSON HOLE FOR GUIDANCE ON TAPERING STATUS)
2- Economists sentiment to Fed's monetary policy adjustment >> the big fear is that the Fed will be slow to act, to pave the way for a sustained surge in prices, along with a housing bubble it will have to deal by jacking up interest rates and derailing the recovery.
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according to last FOMC, there was not a whole lot of agreement beyond that Fed COULD start reducing the pace of their bond-buying by the end of the year, now it is just about tweaking the timing, which is considered as NOT ONLY USD POSITIVE BUT ALSO insufficient information to the investors who are waiting for a clear calendar date to predict the dollar value accordingly.
3- EU will likely decide to reimpose non-essential travel restrictions on the U.S.
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still not legislated but risks to less USD demand.
reasons to expect a drop to 1.1700?
1- German and EU PMI data ( Services PMI, Manufacturing PMI, Markit Composite PMI ) >> modestly dropped.
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indicating slower overall economic performance in August, and if to combine it with the ECB policy (dovish, extended PEPP) = decrease the chance to break above the resistance 1.1750 but I still mention that it is possible to retest 1.1800 according to recent fundamentals.
2- U.S. PMI data ( Services PMI, Manufacturing PMI, Markit Composite PMI ) >> modestly dropped.
=
indicating slower overall economic performance in August, and if to combine it with the high inflation = on the contrary good for the USD as the data signs for lesser running hot economy, also it is wise not to forget the Fed is still shifting its tone to Hawkish and doing somehow progress to announce official date of tapering asset purchases.
3- German Ifo Business Climate Index (Aug), German Business Expectations (Aug) >> dropped.
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indicating worse future expectations on economic growth, less expected economic performance.
CONCLUSION
- PRICE VOLATILITY IN THE RANGE OF (1.1800-1.1700) IS EXPECTED AHEAD OF JACKSON HOLE ALSO IN CASE OF ANNOUNCING TAPER OFFICIAL DATE (BY END OF YEAR, NOT LATER) -
- BREAK ABOVE 1.1800 IS EXPECTED IF IN JACKSON HOLE SYMPOSIUM DOES NOT HAPPEN ANNOUNCEMENT OF OFFICIAL TAPER DATE OR TO ANNOUNCE DATE BUT IF TO BE BY EARLY NEXT YEAR -
- BREAKING BELOW 1.1700 IS VERY LOW EXPECTED IN ANY CASE -
- TO BUY NEAR SUPPORT 1.1700 AHEAD OF JACKSON HOLE SYMPOSIUM OR TO PREDICT SELL ENTRY DEPENDING ON THE TAPER FUTURE UPDATES -
- THIS OUTLOOK REMAINS ONLY TILL UPCOMING NEWS AND DATA THAT MAY CHANGE THE PRICE RANGE, SO I WILL UPDATE ACCORDINGLY -
reasons to again expect a retest of 1.1800 at risk of breaking out above to 1.1850?
1- House adopted a $3.5 trillion budget resolution that advances his economic agenda. Already passed by the Senate, the bill now goes to committees that will write the details into tax and spending legislation that both chambers will vote on later this year. The agreement end a standoff that threatened to stall the party's domestic agenda, including the bipartisan $550 billion infrastructure deal.
=
legislating the budget means more fiscal support to the economy, that raises the expectations of a longer term dovish Fed, in order to keep the benefits of that support and push economic recovery higher, as well as spending which is USD negative even if tapering asset purchases takes place by end of the year, OR in other words, tapering asset purchases + more fiscal support (3.5T budget) at the same time = stable dollar (NO USD UP , NO USD DOWN), only down in case tapering gets delayed (EYES ON JACKSON HOLE FOR GUIDANCE ON TAPERING STATUS)
2- Economists sentiment to Fed's monetary policy adjustment >> the big fear is that the Fed will be slow to act, to pave the way for a sustained surge in prices, along with a housing bubble it will have to deal by jacking up interest rates and derailing the recovery.
=
according to last FOMC, there was not a whole lot of agreement beyond that Fed COULD start reducing the pace of their bond-buying by the end of the year, now it is just about tweaking the timing, which is considered as NOT ONLY USD POSITIVE BUT ALSO insufficient information to the investors who are waiting for a clear calendar date to predict the dollar value accordingly.
3- EU will likely decide to reimpose non-essential travel restrictions on the U.S.
=
still not legislated but risks to less USD demand.
reasons to expect a drop to 1.1700?
1- German and EU PMI data ( Services PMI, Manufacturing PMI, Markit Composite PMI ) >> modestly dropped.
=
indicating slower overall economic performance in August, and if to combine it with the ECB policy (dovish, extended PEPP) = decrease the chance to break above the resistance 1.1750 but I still mention that it is possible to retest 1.1800 according to recent fundamentals.
2- U.S. PMI data ( Services PMI, Manufacturing PMI, Markit Composite PMI ) >> modestly dropped.
=
indicating slower overall economic performance in August, and if to combine it with the high inflation = on the contrary good for the USD as the data signs for lesser running hot economy, also it is wise not to forget the Fed is still shifting its tone to Hawkish and doing somehow progress to announce official date of tapering asset purchases.
3- German Ifo Business Climate Index (Aug), German Business Expectations (Aug) >> dropped.
=
indicating worse future expectations on economic growth, less expected economic performance.
CONCLUSION
- PRICE VOLATILITY IN THE RANGE OF (1.1800-1.1700) IS EXPECTED AHEAD OF JACKSON HOLE ALSO IN CASE OF ANNOUNCING TAPER OFFICIAL DATE (BY END OF YEAR, NOT LATER) -
- BREAK ABOVE 1.1800 IS EXPECTED IF IN JACKSON HOLE SYMPOSIUM DOES NOT HAPPEN ANNOUNCEMENT OF OFFICIAL TAPER DATE OR TO ANNOUNCE DATE BUT IF TO BE BY EARLY NEXT YEAR -
- BREAKING BELOW 1.1700 IS VERY LOW EXPECTED IN ANY CASE -
- TO BUY NEAR SUPPORT 1.1700 AHEAD OF JACKSON HOLE SYMPOSIUM OR TO PREDICT SELL ENTRY DEPENDING ON THE TAPER FUTURE UPDATES -
- THIS OUTLOOK REMAINS ONLY TILL UPCOMING NEWS AND DATA THAT MAY CHANGE THE PRICE RANGE, SO I WILL UPDATE ACCORDINGLY -