Fed weakens USD

Financial and commodity markets analytics

Market Watch review. 28.8.2020

In today's release, we’ll cover the following topics:

  • US Federal Reserve Monetary Policy.
  • General weakening of USD.
  • Growth of US stock indices.
  • Analysis of a EUR/USD buy deal.

I'll start with the main event of the week, the Jackson Hole Economic Symposium. Traditionally, the Fed chooses this event to announce changes in monetary policy. So yesterday, US Federal Reserve Governor Jerome Powell announced the regulator's readiness to tolerate inflation above the target level of 2%. I will not say that this statement became news for traders and investors, on the contrary. It is for this reason that the market reaction has not been very strong.

Pay attention to the price chart of the EUR / USD currency pair. In the first few hours after Jerome Powell's speech, the volatility of trading in this currency pair exceeded 140 points. And today the quotes have returned to the high of yesterday. But only fixing the pair above the level of 1.1900 will allow us to speak about the buyers' readiness to continue the growth.

And now I would like to draw your attention to a rather strange, although already familiar situation. US stock indices continue to rise. For example, the S & P500 index reached the psychological resistance level at 3500, renewing its all-time high. That being said, the demand for defensive assets such as gold and JPY is also growing. All of this indicates that investors are looking forward to further infusion of liquidity into the US economy, thereby stimulating demand in all markets.

Moving to the American trading session, I would like to draw your attention to the forthcoming publication of the report on changes in GDP in Canada. Given the pessimistic forecasts of economists, there is a risk of a moderate weakening of the CAD at the time of release. At the same time, the rise in oil prices may keep the sellers of the Canadian dollar from significant weakening.

An equally important event for traders may be the release of data on changes in the spending of the US population. The lack of forecasted growth could increase the pressure on the USD, triggering a more powerful wave of sales throughout the market. Therefore, only unexpectedly very strong data in the report will lead to the strengthening of the USD.

I will conclude today's review by analyzing the deal to buy the EUR/USD currency pair, which the trader opened at the time of the speech by the US Fed Governor Jerome Powell and, as a result, return of the quotes to the level of 1.1800. Take Profit order was placed at the next strong technical resistance level 1.1900. The deal was opened with a volume of 1 lot, so the profit was $1000.

Closely monitor the news background and be prepared for all the surprises of the market.


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