S&P 500 and Nasdaq on New Records Ahead of Jackson Hole Symposium

Major EU and US indices were a sea of green yesterday, with the S&P 500 and Nasdaq hitting fresh all-time highs. That said, appetite softened during the Asian session today, perhaps due to fresh tensions between the US and China. As for today, all market attention is likely to fall on Powell’s keynote speech, addressing the Jackson Hole economic symposium, which will be held virtually due to the pandemic.

Investors Lock Gaze on Fed Powell’s Jackson Hole Speech

The weakness of the dollar and the Swiss franc, combined with the strength in the risk-linked Kiwi, suggests that market participants may have increased their risk exposure yesterday. Indeed, looking at the equity world, we see that major EU and US indices were a sea of green, but during the Asian session today, participants’ appetite softened again.

It seems that the catalyst behind the boost during the EU session may have been the accord among Germany’s coalition parties with regards to extending the measures aimed at cushioning the economic effects from the pandemic. France is also set to present an economy recovery plan, on September 3 rd. The optimism rolled over into the US session, with the S&P 500 and Nasdaq hitting fresh record highs, as investors stayed focus on tech-related stocks that have outperformed since the onset of the crisis. That said, things changed during the Asian trading today, with participants scaling down their risk exposure, perhaps due to fresh tensions between the US and China. Yesterday, the US backlisted 24 Chinese firms and targeted individuals, saying that they were part of military action in the South China Sea, while China, in a warning to the US, launched two missiles into the sea.

As for today, we stick to our guns that the spotlight is likely to fall on the Jackson Hole annual economic symposium, which will be held virtually this time, and especially on Fed Chair Powell’s keynote speech, scheduled for today. Last week, the minutes of the latest FOMC gathering revealed that several officials suggested that additional accommodation could be required, and added that fiscal support would also be necessary. However, they saw only modest benefits from adopting a yield curve control strategy, and thus, this was “not warranted” now.

With no clear picture as to what form any potential additional easing may take, investors may lock their gaze on Powell’s speech for more clarity on that front. They may also be looking for clues on the timing of any additional action, especially if the White House and Congress Democrats stay deadlocked in agreeing over a new coronavirus-aid package. If the Fed Chief suggests that further stimulus is on the cards, perhaps as early as next month, equites are likely to extend their uptrends, while the dollar is likely to continue tumbling. The opposite may be true, if Powell appears less dovish than anticipated, something that could scale back expectations over fresh accommodative measures before the end of this year. Market chatter also suggests that Powell may address a future approach to the inflation target, allowing consumer prices to move higher, and thereby delay any potential increase in interest rates. Something like that could add further pressure on the dollar, while it could prove positive for equities, as it would mean extra-loose monetary policy for longer.

S&P 500 — Technical Outlook

After yesterday’s new all-time high, the S&P 500 might correct slightly lower and test the aforementioned steeper short-term upside support line. If that line provides a decent hold-up, the index could attract the buyers again and rebound back to the 3487 hurdle, which is the current all-time high. If the bulls are able to overcome that barrier this time, that would confirm a forthcoming higher high and place the S&P 500 into the uncharted territory. We may then aim for psychological levels like 3500, or even higher.

Alternatively, a break of that steeper upside line might temporarily spook the bulls from the field, allowing more sellers to join in, especially if the price also falls below the high of August 25 th, at 3452. Such a move may clear the way to the low of that same day, at 3425, a break of which could send the S&P 500 to the previously-discussed upside line, drawn from the low of July 30 th. If that line stays intact, the bulls might take charge again.

USD/CAD — Technical Outlook

If the bears eventually find enough strength and push USD/CAD below the 1.3133 hurdle, marked near the lows of August 19 th, 24 thand 26 th, that will confirm a forthcoming lower low and may clear the path towards lower areas. The pair could travel to the 1.3078 zone, a break of which might open the door for a move to the 1.3031 level. That level is marked near the lows of January 10 th, 13 th, 15 th, 16 thand 17 th.

On the upside, if the previously-mentioned downside line breaks and the rate rises above the 1.3239 barrier, marked near the highs of August 20 thand 24 th, that may increase the pair’s chances of traveling further north, as more buyers may see this move as a change in the direction of the short-term trend. USD/CAD could then rise to the 1.3270 obstacle, a break of which might lead to a test of the 200 EMA on the 4-hour chart, or the 1.3347 level, marked by the high of August 12 th.

As for the Rest of Today’s Events

As for tonight, during the Asian morning Friday, Japan’s Tokyo CPIs for August are due out. No forecast is available for the headline rate, while the core one is anticipated to have ticked down to +0.3% yoy from +0.4%.

Besides Fed Chair Powell, we have two more speakers on today’s agenda: BoC Governor Tiff Macklem and ECB Executive Board member Philip Lane.


The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.25% of retail investor accounts lose money when trading CFDs with the Company. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please read the full Risk Disclosure.

Copyright 2020 JFD Group Ltd.

Originally published at https://www.jfdbank.com on August 27, 2020.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store

JFD is a leading Group of Companies offering financial and investment services and activities.