No Fundamental Changes After Jackson Hole

The market has been waiting for Jackson Hole throughout the summer and now that the Jackson Hole symposium is behind us, not much has changed as Federal Reserve Chair Jerome Powell didn’t offer a conclusive timeline for scaling back stimulus. He said the central bank could begin reducing its bond purchases this year but won’t be in a hurry to raise interest rates. One thing is certain following Powell’s virtual speech from Friday: A taper is coming. But this is what the market has already priced in, which is why the U.S. dollar sold off on the market’s interpretation that the Fed’s tempo is less aggressive than what was anticipated.

The focus now shifts to the U.S. jobs data on Friday for clues about the economic recovery.

We remind traders that the week before the U.S. Labor Day holiday is notorious for its quiet and illiquidity. In other words, big market moves could be missing in the coming days.

EUR/USD

The greenback fell and pushed the pair towards 1.1810. Since the pair entered overbought territory and tested the 1.18-resistance zone, we prepare for a correction in the latest upward movement. For the bullish movement to continue, we will keep tabs on a break above 1.1860 which could see a test of 1.1890-1.1920. Dollar bulls, on the other side, will have to wait either for a sustained break below 1.17 or a failed attempt to break above 1.19 in order to push the pair lower towards the crucial 1.16-support.

GBP/USD – As long as the cable holds above 1.3650-10, we see a next resistance at around 1.3820. An upside break of 1.3910 could spur bullish action towards 1.40. Breaking, however, significantly below 1.36 could pave the way for a sell-off towards 1.34.

DAX – The index marked a short-term support at 15700. We will focus on a renewed break above 15920 in order to anticipate a higher target at 16050 but bullish momentum will depend on liquidity.

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