Fed Chief Powell Speaks at Jackson Hole, Merkel Lifts the Pound Again

INVESTORS LOCK GAZE ON POWELL’S SPEECH AT JACKSON HOLE

The dollar traded higher against all but two of the other G10 currencies on Thursday and during the Asian morning Friday. It notably underperformed against GBP, which surged again on Merkel’s remarks (see below), while it slid somewhat versus NZD. The greenback gained the most against SEK, NOK and CHF in that order.

AUD/USD — TECHNICAL OUTLOOK

AUD/USD traded south yesterday, after it hit resistance near 0.6797 on Wednesday. That said, the slide was stopped today during the Asian trading, near the 0.6745 zone. Overall, the pair has been trading in a sideways mode since August 8th, between that support and the resistance of 0.6820, thus, we would take a neutral stance at the moment, although the rate appears to be flirting with the lower end of the range.

GBP-TRADERS CHEER MERKEL’S COMMENTS AGAIN

The pound was found as the main gainer this morning, skyrocketing after German Chancellor Merkel said that her comments on Tuesday over a solution with regards to the Irish backstop in 30 days were meant to highlight urgency and not a strict deadline. “I said that what one can achieve in three or two years can also be achieved in 30 days. Better said, one must say that one can also achieve it by October 31st,” the Chancellor noted.

GBP/CAD — TECHNICAL OUTLOOK

GBP/CAD skyrocketed yesterday following German Chancellor Merkel’s Brexit comments, breaking above the downside resistance line drawn from the peak of June 3rd, as well as above the resistance (now turned into support) obstacles of 1.6230 and 1.6255. This, combined with the fact that the rate is also trading above a short-term upside support line taken from the low of August 9th, has turned the short-term outlook to somewhat positive in our view.

AS FOR THE REST OF TODAY’S EVENTS

Besides Powell’s speech at Jackson Hole, the rest of today’s agenda appears to be light with the only indicators worth mentioning being the US new home sales for July and Canada’s retail sales for June. The US new home sales are expected to have declined 0.2% mom after rising 7.0% in June, while both Canada’s headline and core retail sales are anticipated to have slid 0.1% mom, after falling 0.1% and 0.3% respectively.

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