The Sermon on the Mount occurred over 2,000 years ago and is the basis for Christianity. Fed Chair Jerome Powell’s Sermon from Jackson Hole will be the basis for US interest rate discourse for about 2,000 hours or until the FOMC meeting September 18. Financial markets hope his 10 am (EDT) speech titled, “Challenges for Monetary Policy,” provides clarity around the Fed’s monetary policy outlook.  That is extra important after the FOMC minutes pointed to a lack of agreement among Committee members.

Mr Powell won’t be the only Fed official talking. Traders will be hearing from St Louis Fed President James Bullard, Dallas Fed President Robert Kaplan, and Cleveland Fed President Loretta Mester.

The US dollar saw fresh demand overnight, posting small gains against the G-10 major currencies except for the British pound. There wasn’t any economic data of note.

FX Market Snapshot

Change in Currency value vs the US dollar-   NY close  to NY open

EURUSD slid steadily lower after touching 1.1110 yesterday, and the decisive break of 1.1080 set the stage for further losses to 1.0835. Powell’s speech could fuel the move, especially if his remarks are less dovish than expected.

Sterling soared yesterday. A  remark by Angela Merkel, which, according to Bloomberg, was lost in translation, sent GBPUSD to 1.2270 from 1.2145. Her comments were reported as suggesting she was willing to drop the Irish backstop if the UK had another idea. 

She really said “if there is a solution, a way to do this… it has been said that we’ll probably find it in the next two years. But one could also, maybe, find it in the next 30 days. Why not? Then we’ve taken a big step forward. We must make an effort to find something like this.”

GBPUSD traded with a negative bias overnight and opened in New York at 1.2209

In Asia, USDJPY traded higher alongside rising US Treasury yields. Japan July inflation was as expected and not a trading factor.

NZDUSD got a bit of a lift after RBNZ Governor Adrian Orr’s remarks.  He said recent rate cuts mean the central bank “can afford to watch, wait and observe” economic developments.   Traders concluded he meant additional rate cuts will be delayed. AUDUSD tracked NZDUSD moves, and both opened with small losses compared to yesterday’s close.

USDCAD rallied on the back of broad US dollar demand and a drop in crude prices. June Retail Sales (forecast -0.1% vs May -0.1%) may not have much impact on USDCAD trading due to the focus on Powell’s Jackson Hole speech.

President Trump is at the G-7 meeting in France.  He has hijacked the past two meetings with bombastic outbursts which suggests high odds for a repeat performance and his remarks may impact trading.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish while prices are above 1.3290, looking for a break above 1.3340 to target 1.3380 and then 1.3460. Longer term, the uptrend from the middle of July is intact above 1.3270. The rally above 1.3290, the 50% Fibonacci retracement of the May-July range targets the 76.4% Fibonacci level of 1.3435.. For today, USDCAD support is at 1.3290 and 1.3260.  Resistance is at 1.3340 and 1.3380.

Today’s Range 1.3290-1.3380

Chart: USDCAD daily

Source: Saxo Bank