MARKETS GETTING READY FOR YELLEN’S SPEECH
The markets are getting jittery ahead of one of the most important economic events in the world that starts today. Central bankers from the major economic powers around the world will be speaking at the symposium in Jackson Hole. The main focus tomorrow will be on the speeches by the head of the Fed Janet Yellen and the ECB’s President Mario Draghi. Hints about possible monetary policy tightening in the US and Eurozone may lead to increased volatility in the currency markets. Keep in mind that during last week the probability of a third rate hike in America for 2017 fell below 40% and in case of dovish rhetoric by Janet Yellen, we may see the acceleration of the price growth of EUR/USD. Today we saw little impact on traders’ sentiment from the initial unemployment claims report in America, according to which the number of claims was 234,000 versus the 237,000 expected.
The pound improved its positions despite controversial statistics from the UK. The preliminary report on GDP showed the economy expanded by 0.3% which was in line with the forecast, but the CBI retail sales balance in August declined to -10 compared to the prediction of 15. Doubts about the strength of the British economy on the background of Brexit talks with the EU is likely to continue pulling the sterling down.
The USD/JPY price is rising due to fixing of positions before the Jackson Hole statements and amid lower demand for the Japanese yen as a defensive asset. Volatility growth is possible today after the inflation report release at 23:30 GMT.
The EUR/USD is located near the important level of 1.1800. Breaking through the local resistance at 1.1825 may be the stimulus for continued increases up to 1.1900 and 1.2000. The MACD and RSI are not giving any signals about possible moves of the pair, but the decline in the amplitude of price fluctuations usually points to a rise in volatility soon. The first targets in case of the fall resuming are 1.1700 and 1.1620.
The GBP/USD approached the upper limit of the descending channel. Its overcoming and fixing above the closest resistance at 1.2840 may become a signal to buy with the stop below 1.2775 and potential targets at 1.2950 and 1.3050. Despite a possible trend change, the probability of a further price drop with the next target at 1.2635 remains high.
The USD/JPY price is testing the angled resistance after the rebound from strong support at 108.85. Should the guppy increase and overcome 109.60 the next objectives will be 110.30 and 111.00. Potential decline today is likely to be restrained by support at 108.85, but it may be broken tomorrow on the background of important statements at the Jackson Hole symposium.