- Fed shifting to Average Inflation Targeting,
- US Jobless Claims stay above 1.0 million
- Wall Street opens with Nasdaq flat, DJIA, and S&P 500 modestly higher
- US dollar opened nearly unchanged, slides during Powell’s speech, recovers losses at the end
Saxo Bank/IFXA Ltd
FX Recap and outlook: The US dollar is sliding as Jerome Powell speaks. Mr Powell confirmed the rumour of a shift to Average Inflation Targeting of 2.0% from a hard target of 2.0%. The change was necessitated by changes in underlying conditions, growth, productivity, and inflation.
The Fed is tweaking their employment goal of maximum employment by basing policy decisions on “shortfalls of employment from its maximum levels.” The previous guide was “deviations from its maximum level.”
FX markets ignored today’s Jobless Claims numbers. Claims rose 1.006 million last week, which points to a sluggish economic rebound. Traders sold US dollars during Powell’s speech.
EURUSD jumped to 1.1901 from 1.1836 as Powell spoke, then retreated to 1.1850 after trading in a 1.1818-1.1849 range overnight. The short term technicals are bullish inside the recent 1.1700-1.1900 range but topside gains are hampered by stretch long EURUSD positions.
GBPUSD spiked to 1.3284 from 1.3220 before the speech. That gain disappeared by the end of the speech. The prospect of low US interest rates for an extended period and the GBPUSD uptrend from July underpinned prices.
There were not any economic reports of note released overnight except for Swiss Q2 GDP (-9.3% y/y). Hurricane Laura hit the Gulf Coast as a Category 3 storm which underpinned crude prices on supply disruption concerns.
USDCAD broke support at 1.3130 but could not break support at 1.3110. The currency pair is mirroring broad US dollar moves. Traders continue to ignore domestic data.
USDCAD Technicals: The USDCAD technicals are bearish inside a 1.3110-1.3230, range. A break below 1.3110 targets 1.3030 and then 1.2950, the 2020 low. A break above 1.3230-60 zone is needed to negate the downward pressure and extend gains to 1.3500. For today, USDCAD support is at 1.3110 and 1.3080. Resistance is at 1.3180 and 1.3210. Today’s Range 1.3080-1.3180
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank