Market news

Overnight Headlines

*USD moved off one-week lows, trading around 93

*US stocks fell from all-time highs, still up on the week

*Gold is pushing into the near-term highs and trendline resistance

USD jumped from the lows of the week at 92.80 which is now near-term support. Several known hawkish Fed members were on the wires supporting tapering sooner rather than later. EUR closed lower for the first time in four sessions. GBP saw lows of 1.3690 while USD/JPY rose above 110 before slipping back this morning. Commod-$s also fell as the risk rally stalled.

US equities declined modestly as developments in Afghanistan weighed on sentiment. But Wall Street is still set to end the week and month in the green. The VIX has snapped the downward trend but is still below 20. Asian markets are relatively quiet with US futures slightly higher.

Market Thoughts – Over to you, Fed Chair Powell

The majors are more or less confined to recent ranges with broad measures of FX volatility still relatively muted. Expectations are that Chair Powell adopts a more cautious tone today due to the Delta variant. That means the bar for a dovish surprise seems higher than compared to a more hawkish signal. In the medium term, consensus still thinks the Fed will normalise policy measures faster than most of its peers. This supports a higher dollar in time.

Any more concrete guidance from Powell today that tapering will happen soon sees a strong bid to the greenback and stocks sell off. His speech is slated for 15.00BST. We note the next jobs report is due out next Friday. More policy detail could be seen at the Fed meeting in three weeks. We get core PCE inflation data out before Powell takes to the floor. It is forecast to mirror the core PCI reading earlier in the month. This showed a moderation in the monthly gain in core prices.

Chart of the Day – DXY off recent lows

The DXY has suffered this week as risky assets have rallied. The index is now off its lows around 92.80 as traders ready themselves for Powell. The trend is still for higher prices with support also offered by the trendline from the June lows. Resistance above comes in at the July high at 93.19 before the March high at 93.43. We did pierce that level last week but failed to close higher on the week.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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