A sense of calm remains across global markets (exception being the cryptocurrency that goes by the name of ‘Ripple’), as today marks the start of the Jackson Hole Economic Symposium. Tomorrow is when matters really get interesting, as we’re going to hear from both Fed Chair Janet Yellen and ECB President Mario Draghi. While the theme of the event is ‘Fostering a Dynamic Global Economy’, the bigger question will revolve around the prospect of quantitative tightening. As the Fed has now pushed three rate hikes through in the past nine months, they’re now looking to begin reducing the balance sheet that had ballooned to over $4.5 Trillion during their multiple rounds of QE. In Europe, investors are pricing-in the very realistic prospect that the ECB will start to slow down their own stimulus program; and for the first time in over nine years we will have a world that might not being funded by liquidity programs from one of the world’s two largest economies. So while there will likely be much glad-handing and numerous press events, there are some very real questions on investors’ minds as we go into this widely-watched event.
One area of intense interest as we go into Jackson Hole is whether the U.S. Dollar is in the process of carving out a longer-term bottom. DXY set a fresh low on the second trading day of the month, but since then has been unable to break-lower. This would be the longest that the U.S. Dollar has went without making a new low since March/April. This isn’t quite a bullish scenario yet, as sellers remain vigilant around resistance and the past week has brought in a series of lower-highs. But the simple fact that the Dollar has stopped making new lows, at least temporarily, highlights the potential for a return of bullish price action as we near the really big fundamental driver of Jackson Hole.
U.S. Dollar via ‘DXY’ Hourly: Higher-Lows in August
Chart prepared by James Stanley
