Stocks push higher as looming Powell speech eyed

Updated August 25, 2022

Headlines

*Dollar eases from near two-decade peak as Jackson Hole looms

*Global stocks in for chilly winter, strategists say – Reuters Poll

*BoJ policymaker vows to keep ultra-low rates, warns of economic risks

*Asian markets gain, investors anxious for US rate hike clues

US equities notched marginal gains with sector performance fairly random. The benchmark S&P 500 posted a small gain of 0.29%. Intraday moves were capped within 1%. Mixed US durable goods data led to a downgrade in the Atlanta Fed Q3 GDP tracker. Asian stocks have taken impetus from the mildly positive Wall Street gains. Futures are indicative of a stronger open.

USD continue to soften this morning as we head into month end. Some Wall Street models are signalling USD weakness against G10 FX. EUR is challenging parity again. GBP has reclaimed 1.18 but may be capped as it waits for BoE rhetoric from Governor Bailey in Wyoming. USD/JPY is consolidating above the 50-day SMA at 135.70. AUD is positive after recent gains in commodities and is heading towards 0.70.

Day Ahead – Back and forth for the greenback

As is often the way before a big risk event, there is a lot of speculation about what is to come and how price action will evolve. That means markets are being pushed and pulled, with the dollar being the prime example. US futures have just jumped higher in the last hour which means the buck is getting sold. It had been firmer yesterday before selling off through the day.

Traders are indecisive it’s fair to say, ahead of Fed Chair Powell’s speech tomorrow. The shift higher in US Treasury yields over the past few weeks points to a more hawkish message. This would be in line with recent remarks from Fed officials, in contrast to the July post-FOMC dovish pivot. There is still a long way to go to get inflation back down to its 2% target. Data dependency may also be stressed and dictate policy going forward.

Chart of the Day – Dax clings to support

Today’s main economic release is the German IFO survey of the business climate for August. The current situation figure is expected to show a drop in confidence, after the relatively weak PMI release on Tuesday. The expectations number is also set to fall amid elevated inflation and the ongoing energy crisis.

The German benchmark equity index has fallen sharply since we last wrote about it. Long-term trendline resistance, the 14k mark and a Fib level (38.2%) of this year’s high/low move at 13,908 capped the upside. Prices are now trading around the 50-day SMA at 13,222. Next level of support is 12,912. Resistance above is 13,346.

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