High US interest is here to stay

by | Aug 30, 2022 | Forex Articles

Inflation

Hi everyone,
Friday was a perfect example of why it is so dangerous to trade during or even around red flag news.

The red flag news in question? Fed chair Powell’s Jackson Hole symposium speech….

So, what is the Jackson Hole symposium you ask?

The Jackson Hole Economic Symposium is an annual event held in Jackson Hole, Wyoming (USA). It is one of the longest-standing central banking conferences in the world. It hosts dozens of central bankers, policymakers, academics and economists from around the world. “The goal of the Symposium when it began was to provide a vehicle for promoting public discussion and exchanging ideas. Throughout the event’s history in Jackson Hole, attendees from 70 countries have gathered to share their diverse perspectives and experiences”.  Central bankers, should raise alarm bells with you by now :))

So why Jackson Hole?

“When officials of the Federal Reserve Bank of Kansas City sought a location for an annual economic symposium in 1982, they chose Jackson Hole, Wyoming, for a simple reason: It had fly-fishing, AP reported. Paul Volcker, the Fed chairman at the time, was known to enjoy the pastime, and it was hoped that the opportunity to do some fishing would draw Volcker away from Washington, D.C.’s late August heat. The ploy worked, and the Fed has held a conference there in late August ever since”.

Back to this year…
So what were the main takeaways from Jerome Powell’s speech?

– The US interest rate will more than likely move higher.
– The lower inflation readings for July (a single month’s improvement) falls far short of what the FED needs to see before the FOMC can be confident that inflation is moving down.
– The Fed’s main rate will move above 2.50% and stay there for some time.
– US Treasury yields are moving higher. This will likely have a negative impact on the equity (and potentially crypto) markets.
– The expected rate cuts in 2023 have been moved back.

EUR/USD: 5min chart during Friday’s red flag news event;
…..50 pips up and 50 pips down in 10 minutes 

Commodity prices;
Chinese stimulus looks to have ‘saved’ the iron ore price, but gold and silver look under pressure.

Gold;
Gold is now moving lower after bouncing off 1800. Friday’s big bearish candle was news related, but I suspect it might make another run at 1800. I still believe that a break above this level could see a big and prolonged rise in price.

Oil;
Bounced off the 200 this week. With the war raging on, expect the oil price to stay volatile.

Bitcoin;
Also didn’t like the news on Friday and has now broken and stayed below 20k…which is big.

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The Forex Week Ahead

It’s the first week of a new month and that means a busy busy news week. As has been the trend recently, any inflation news could have a major impact on the ‘big’ picture. We don’t trade on Fridays (or shouldn’t) but the BIG one for the week is Non-Farms.

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MAJORS

EUR/USD: Chopping along parity at the moment. Smaller timeframe short at 1.02400

USD/CHF: A grade long from 0.94800. A long from the current position on the shorter timeframe looks very interesting. (See video)

GBP/USD: Short from 1.2100

AUD/USD: Worked, but unfortunately on Friday. Short again from 0.698000

NZD/USD: Highly correlated to the AUD/USD, but keep an eye on the 0.6300 level for a short

USD/CAD:  Would like to long from 1.2850

USD/JPY: Miles away, but  A grade long from 126.100 (See video for a few other ideas)

CROSSES

EUR/GBP: I’d be careful taking this now. I would recommend waiting for a bearish candle, but a short from the current position does look interesting. 0.8500 is BIG for this pair. If it breaks above this level, I’d look to long.

AUD/CAD: 0.91000 for a possible short. On the smaller timeframes have a look at playing the 0.89700 to 0.9100 range (See video)

AUD/NZD: Countertrend trade, but I’d be looking to short from the current position. I’ve shown this level many times in the past, it is a massive area! Long from 1.107300

EUR/CAD: A grade for me is a short at 1.37100 (VERY far away though)

NZD/JPY: I showed in the live session this week how this pair was in a tight range and that price needed to make up its mind….It looks like it has. I show in the video  how I plan to play this.

GBP/JPY: Long from 160.00

EUR/JPY: Long from 135.400

GBP/CHF: Looking at the weekly, I like the look of a short from 1.2100.  On the daily or even smaller timeframes 1.16450 to short looks interesting.

GBP/AUD: Short from 1.7400

As always, remember correlation! –Especially when taking more than one JPY trade!

We are NOT a “tipping service” our aim is to teach you how to trade for yourself.

Watch the video below for more detailed explanations of this week’s analysis and trade plan (click the 4 arrows bottom right to view full-screen):

Regards
Thinus

Related posts:

Interest rateEffects of high interest rate InflationUS Inflation at 40 year high BIG potential setupsRemember the bigger picture! FrenchDXY hits 100 and French elections

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