A volatile FX session ends peacefully
Gary Christie August 28, 2020 4:58 AM
Fed Chair Powell hints of continued low rates for some time. USD/JPY trades up.
The US Dollar was bearish against most of its major pairs on Thursday with the exception of the JPY. On the U.S. economic data front, U.S. GDP rose to -31.7% on quarter in the second quarter second reading (-32.5% expected), from -32.9% in the second quarter advanced reading. Initial Jobless Claims decreased to 1,006K for the week ending August 22nd (1,000K expected), from a revised 1,104K in the previous week. Continuing Claims fell to 14,535K for the week ending August 15th (14,400K expected), from a revised 14,758K a week earlier. Pending Home Sales rose 5.9% on month in July (+2.0% expected), compared to +15.8% in June.
Fed Chair J. Powell spoke at the Jackson Hole Economic Policy Symposium where he outlined the Fed's newly revised consensus statement. Firstly, the Fed removed its maximum employment target and instead aims for maximum employment as a broad based goal. Secondly, the Fed seeks to achieve inflation that averages 2%, rather than a 2% target. Although the changes are subtle, it shows the severe impact of the coronavirus on a US economy that was already slowing prior to pandemic.
On Friday, Personal Income for July is expected to slip 0.4% on month, compared to -1.1% in June. Wholesale Inventories for the July preliminary reading are expected to decline 0.9% on month, compared to -1.4% in the June final reading. Personal Spending for July is expected to rise 1.5% on month, compared to +5.6% in June. Market News International's Chicago Purchasing Managers' Index for August is expected to advance to 52.6 on month, from 51.9 in July. Finally, the University of Michigan's Consumer Sentiment Index for the August final reading is expected to remain at 72.8 on month, in line with the August preliminary reading.
The Euro was bearish against most of its major pairs with the exception of the JPY. In Europe, the European Central Bank has reported M3 Money Supply growth in July at +10.2% (vs +9.2% on year expected). France's INSEE has posted August indicators on business confidence at 91 (vs 88 expected) and manufacturing confidence at 93 (vs 86 expected).
The Australian dollar was bullish against all of its major pairs.
The US 10 year yield jumped 5.4bps to 0.742%.
Gold dropped $25.83 (-1.32%) to $1928.63.
WTI Crude Oil fell $0.40 (-0.92%) to $42.99.
A volatile start to the U.S. Forex trading session ahead of Fed Chair J. Powell's speech at the Economic policy Symposium ended in a relatively flat session when the closing bell rang. The largest FX pair mover was the USD/JPY which gained 58 pips to 106.57. The pair can't seem to break away from its short-term consolidation inside a bearish trend channel. A break above 107.15 would call for a test of the channel resistance line while a break below 105.10 support would call for a continuation lower to test August lows at 104.20.
Source: GAIN Capital, TradingView
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.