Expectations, expectations...
Hello, dear colleagues!
Fed Chair Jerome Powell's speech during the Jackson Hole economic symposium will be the major event today. Above all else, it is also the key moment of the entire trading week. Market participants expect Powell to either announce the timing of tapering or hint at the possible date at least. The market has several striking features. One of them is that if the market is focused on something, nothing can influence its expectations until they are confirmed or confounded.
In other words, it looks as if market participants force leading central banks to satisfy their expectations. Back in the days when Ben Bernanke was the chair of the Federal Reserve, he often underlined that regulators should not fall in with the market and realize all its expectations. Every leading central bank should develop its monetary policy based on a clear current market environment with important and major macroeconomic indicators at its core. First and foremost, they are inflationary pressure and the state of the labor market. Under the current circumstances, the situation is exacerbated by the economic crisis driven by the COVID-19 pandemic.
It may happen that Jerom Powell will not touch upon the subject of tapering. The chair will most likely repeat that the timing of monetary policy tightening will depend on the results of vaccination against COVID-19 and macroeconomic reports. Growing inflation may again be defined as temporary. Moreover, the labor market should confirm its even pace of recovery. Generally speaking, Powell's much-anticipated speech in Jackson Hole may disappoint market participants and trigger a sell-off of the US dollar.
Daily
Yesterday, the price closed at 1.17517, that is, near the support level of 1.1752. So far, it remains unclear whether the quote will break the mark. Today, on the last trading day of the week, the closing price will be of crucial importance. Yesterday, EUR/USD closed lower for the first time since August 20. It seems that a rebound from 1.1664 has ended. From the technical point of view in terms of EUR/USD, nothing changed yesterday. Today, ahead of Jerome Powell's speech and because of the last trading day of the week, it is better to stay out of the market. Anyway, resistance is seen in the 1.1785-1.1815 range. Meanwhile, support is located not in the 1.1725-1.1700 range but at the level of 1.1664.
Have a nice trading day!
