Dollar on the front foot on the back of hawkish Jackson Hole comments by FED chair Powell
Dollar Index
The dollar index ended Friday’s trading session with some exuberance, closing at the 108.73 level following a sustained hawkish tone from FED chair Powell at the Jackson Hole Symposium. His message was consistent with the narrative that the FED isn’t quite done yet fighting off inflation and a possible recession. Which essentially means Americans are going to have to brace for more interest rate hikes and consequently slower growth in the economy and a weaker job market.
Technical Analysis:
In terms of market structure, last week saw the completion of the larger bullish continuation pattern (falling wedge) that found support from the 104.00 level and produced an impulsive wave that went on to revisit the 109.00 area last week. Considering current price action and how it is approaching the 20-year highs in the form of a smaller bullish continuation pattern (descending channel), it’s an increasing probability that price could continue beyond the 109.00 key level henceforth.
Stocks
On the back of the dollar strength, there was a selloff in US Stocks, with a 3% decline on the prospect of the FED remaining firm on a sustained period of further rate hikes.
- Dow: Reacted to the statements by plunging 3% (just over 1000 points) on the day.
- S&P 500: Reacted to the statements and fell by 3.4%.
- Nasdaq: Being heavily linked to the technology sector, the Nasdaq is particularly more sensitive to interest rate hikes and reacted by falling 3.9%.
Currencies
- Euro: EURUSD slipped back to below parity levels, closing the day at 0.99654.
- Pound: GBPUSD closed the day retesting the weekly low at 1.17391 after hitting a session high at 1.1900.
Commodities
- Gold: Remained pressured by Powell’s comments despite a momentary bounce earlier in the week, ending Friday’s session at the $1 738 mark.
- Oil: The black gold remained resilient last week, closing the week buoyed by verbal intervention from the Saudis concerning the possibility of cutting oil production. This potentially lends credence to the idea that the Saudis are unable to tolerate a price below $90 a barrel at the present moment.
The leading cryptocurrency broke through the psychological $20 000 mark as bears largely drove the market last week, seeing a 20% decline in a week from a high of $25 211.
An interesting sidenote going into September is that Bitcoin has produced a bearish market environment in price for each of the past four months in the year. It’ll be interesting to see how it performs going into the new month and the last part of the year.
Today – Speeches from ECB’s Lane, Fed Vice Chair Brainard.
Biggest Mover @ (06:30 GMT) NASDAQ (-3.9%). Dropped to 12387$ from 13206$.
