EUR/USD Moves Back Into Parity Ahead of Jackson Hole Meeting
Dollar Bulls Go on a Rampage as Fed Officials Hint Towards More Hikes
The Dollar is back with a vengeance, making significant advances against most of its peers, spurred by strong signals that more interest rate hikes are coming. Fed officials, among which James Bullard (St. Louis Fed Chief) and Mary Daly (San Francisco Fed President), have talked about yet another 75 basis point rate hike in September.
The Federal Reserve’s Jackson Hole Symposium will take place later this week and Fed policymakers are expected to continue on a hawkish tone, which could fuel the greenback further. On top of that, the Euro is dealing with its own internal problems, such as energy problems and elevated producer prices in Germany.
Key Events for the Week Ahead
Tuesday at 7:30 am GMT, traders will focus on the German Manufacturing and Services PMIs and later in the day, at 1:45 pm GMT, on the same indicators but for the U.S. economy. These surveys act as leading indicators of economic health, derived from the opinions of purchasing managers from the respective sectors. The impact is usually medium but can be higher if there’s a notable difference between the forecast and the actual numbers.
Thursday will be the first day of the Jackson Hole Symposium, which will be attended by central bankers, finance ministers, and other key players on the world financial scene. The symposium is held annually and is usually a strong volatility catalyst.
On the same day at 12:30 pm GMT, the U.S. GDP will come out, showing the change in the total value of goods and services produced by the United States. This is usually a strong market-mover but may be overshadowed by the Jackson Hole Symposium.
Friday at 12:30 pm GMT we take a look at U.S. inflation with the release of the Core PCE Price Index and later in the day, at 2:00 pm GMT, Fed Chair Powell will speak at the Jackson Hole Symposium. The speech will be about the economic outlook, thus it will have a direct impact on the US Dollar.
Technical Outlook – EUR/USD
After the break of the bullish trend line drawn from the 0.9952 low, the pair started to accelerate south and is now trading once again in the parity range, at 1.0020. The next destination seems to be the mentioned low, where one of two things can happen: the pair can create a double bottom, which will result in a bullish move, or it can break the low, going into “uncharted” territory.
The Relative Strength Index is moving south without being oversold and the MACD has just crossed downward, indicating increased momentum. These are hints that the pair is likely to continue lower but the week is filled with important events that will most likely affect price movement.
