Euro drifts lower on position balancing ahead of Jackson Hole

Forex Market Insight

What Happened Yesterday

The market has started to reposition itself ahead of the Jackson Hole Symposium (JHS) which starts this Thursday. Traders are awaiting speeches from Fed Chair Janet Yellen and European Central Bank President Mario Draghi in Jackson Hole, although neither of the officials is expected to announce new policy messages. But there presence is enough to see some squaring of major USD short and EUR long positions.

I read in a few commentary’s that the Euro’s dip was due to weak Eurozone data, but that’s a load of rubbish because it was already trading at 1.1765-70 at the time of the German ZEW data and it didn’t go much lower! It bugs me when they make up rubbish.

The Mannheim-based ZEW research institute said its monthly survey showed its economic sentiment index fell to 10.0 from 17.5 in July. This undershot a Reuters consensus forecast for a fall to 15.0. With long positions on the Euro at a near five-year high, according to latest positioning data, it’s no surprise to see Euro drift lower as traders squared up some of these positions ahead of the JHS.

Sterling struggled to get going and was under pressure with the USD move. It slowly drifted lower down through 1.2850 after slightly weaker UK data. It’s shown no real signs of bouncing so it looks like it could be headed for a hard landing!

The Funds came under more pressure after Canadian Retail Sales data (ex-Autos) came in much stronger than expected. It dipped 60 points before recovering most of the move later in the day.

We have further Eurozone data out today so it will be interesting to see how the data drops. Further weakness in the data may see EURUSD testing lower ahead of the JHS.

Today’s Fundamental Drivers

We’re going to have another pretty quiet session in Asia with no major data scheduled. The highlight will of course be the European session for two reasons.

The Euro is the major focus at the moment in the lead up to the JHS and we have some key Eurozone data. So don’t miss it.

Technical Set Up – What’s Happening with the Majors

Most of the majors have drifted back into their recent ranges with Sterling being the exception which actually broke down through a short term support trendline.

Everything else it’s pretty much business as usual.

USDJPY

The YEN continues to trade in a large range with the NKC casting a shadow over it somewhat. The latest move is USD driven so we may see it trade higher to test 110.00 before we see it lower.

EURUSD

Keep an eye on the Eurozone data today. If the data starts coming in weak then we’ll surely see Euro drift lower ahead of the JHS.

 

This soggy Sao can’t float. I think the price action leading up to JHS may get a little loose as the USD sentiment swings every other day, but overall I’m extremely bearish Sterling.

USDCHF

Back trading mid-range which suggests to me the NKC is all but over.

USDCAD

Further economic data has the Funds on track for much lower levels. If Oil wasn’t falling it’d be another 100 points lower easy.

Today’s Focus – Major Currencies in Play

You need to follow the economic data releases & best technical set ups to work out where the majority of action and interest will be.

EURUSD

Technical Set Up: Support 1.1706 & Resistance 1.1820

Fundamental Driver: Eurozone Manufacturing PMI

Potential Strategy: Trade with momentum. Euro is trading mid-range so the data will be key from here.

Next Best Trade Update

We had a short term GBPYEN order on the downside but as the majors moved lower it was clearly a USD move, not a GBP or YEN move, so we cancelled the order. As it turns out the pair did break lower but only drifted 20-30 points through the trendline before rallying back above the level.

So there was a chance for a ‘small’ cash injection but overall I think the decision to cancel the order was justified.

We have also adjusted the entry levels of our two long term orders.

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Time: 7.00pm AEST

Summary

The markets are clearly testing our patience with no major moves or announcements of late. With Jackson Hole just around the corner we’ll have plenty to contemplate in the days to come, so once again relax and enjoy the downtime.

Tune up your charts & get ready to trade…..

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