All Eyes on the Jackson Hole Symposium This Week

During the previous week, US yields rose notably after officials at the Federal Reserve (Fed) reaffirmed their dedication to tighter monetary policy despite indications that inflation was slowing.

Meanwhile, a four-week winning streak for US equity markets was broken as losses on Friday sent the major benchmarks into the red zone for the week. At the same time, the USD accelerated, sending the EURUSD pair to parity again, the GBPUSD below 1.18 and the USDJPY above 137.

Central Bankers Meet

The Federal Reserve Bank of Kansas City is hosting the annual Jackson Hole Symposium, where the nation’s top central bankers will meet starting on Thursday. Since 1981, the symposium has brought notable central bankers, economists, finance ministers, and market players from across the world to Jackson Hole, Wyoming, to address the most important topics affecting the economy and monetary policy.

This year’s symposium is entitled “Reassessing Constraints on the Economy and Policy,” and discussions are anticipated to center on the effects of recent rate hikes, the possibility of a recession, and the Fed’s desire to achieve a soft landing while attempting to lower inflation, which is currently running close to 40-year highs. Market observers will pay particular attention to Fed Chair Jerome Powell’s remarks at the symposium in order to gain further information about the course that monetary policy will take in the near future.

Markets have not yet decided on the amount of the September Fed rate hike, but according to Reuters, only 18 of the 94 economists polled recently predicted the US central bank to choose a 75 basis point (bps) rate change. But according to the CME Group FedWatch Tool, markets are already pricing in a 75 bps rate hike next month with a 48.5% likelihood.

Moreover, the most recent Personal Consumption Expenditures (PCE) Price Index for July will be made public on Friday by the Bureau of Economic Analysis (BEA). The Fed’s chosen inflation indicator is the PCE Price Index. Following a 1.0% increase in June, which was the biggest monthly increase since September 2005, PCE price inflation is anticipated to have eased marginally in July.

PCE prices increased 6.8% year over year in June, which was the fastest annual increase since January 1982. Core PCE prices, which do not include expenditures for food and energy, are estimated to have increased at a 4.7% annual pace in July, somewhat slowing down from 4.8% in June.

Setups for This Week:

WTI Oil

Primary View:

This week, maybe today, WTI should make a bigger movement

We are in a tight zone between the mid-term down trendline (red) and the horizontal support on the 85 USD/bbl (yellow)

If the price breaks the down trendline it will indicate a strong buy signal and if it breaks the yellow support level it will indicate a sell signal

EURUSD

Primary View:

The EURUSD is dropping towards the parity pretty much undisturbed

It all comes after two wedges (blue and black)

This lack of demand actually questions a possible bounce from the parity

Alternative View:

If the price breaks the parity with ease, we may see a freefall

USDJPY

Primary View:

The USDJPY had four strong bullish days in a row

Monday’s risk aversion creates strong demand for the JPY

The price is creating a shooting star (blue) and if that holds, we will have an invitation to a bearish correction