The forex market now is watching out for whatever announcement that might come out of the once-a-year economic policy symposium in Jackson Hole, Wyoming, USA.

US Dollar rose to the strongest level in seven major pairs following a string of events that boosted investor confidence on the currency. Meanwhile, forex market now is watching out for whatever announcement that might come out of the once-a-year economic policy symposium in Jackson Hole, Wyoming, USA.

 

Economic Data-Dependent Monetary Policies

Pounds fell to its lowest since April after Bank of England governor mentioned his concern about slow wage growth, and got worse thereafter as UK CPI dropped lower than expected and MPC Meeting Minutes reveal that the board is still filled with doves. Inflation year-on-year in the UK slowed to 1.6% versus 1.9% in June and 1.8% expectation. MPC Minutes noted that for the first time in more than three years, two of its member voted for rate hike instead of maintaining the current rate. Put alone, the MPC Minutes might boost the GBP; but put it together with the low consumer prices, both provides all the reason for BOE to postpone rate hike.

Meanwhile, the EURUSD continue to reflect monetary direction gap between the US and Eurozone, as well as investors' desire to avoid the now high-risk-zone. As US economic fundamental stats inched up, the Euro slid lower, and now is traded on record low since September 2013. The USDJPY too, has shown a strong bullish bias since Japan on Wednesday released widening trade balance data again. The Yen is now at its weakest since April 2014, traded around 103.85.

The main drive for Sterling, Euro, and Yen depreciation in the coming days, however, is the report of US The Fed FOMC Meeting Minutes that was released a few hours ago. The minutes revealed that FOMC members generally agreed that if their target is reached sooner, then interest rates might be raised sooner too. It's not a particularly new insight into the board members' mind, but it means Fed officials are getting more hawkish. As US economic data improves, investors' confidence in the currency advances.

 

Significance of Jackson Hole Summit

Because the future is uncertain, people keep looking for more informations to move forward although hints have been given; that's how we could describe the financial market. Forex market too, is not an exception. Therefore, it is not surprising that although FOMC Minutes was just released, the market have gone on to speculate on what the Fed governor, Janet Yellen, is going to say in the three days symposium known as Jackson Hole Summit that will be held from Thursday to Saturday.

BenFormer Fed Chief Ben Bernanke (right) and economist Martin Redrado (left) when they exited Jackson Hole Symposium in 2011.

Jackson Hole Summit is an annual economic policy symposium at Jackson Lake Lodge in Jackson Hole valley, Wyoming, hosted by The Fed Kansas. Such event have been held since 1978 in various locations until they fixed it at Jackson Hole in 1982. It gathers worldwide economy decision makers and academicians, with guest list including central bankers, economist, and the likes. The symposium attracted attention in the last few years because it has revealed several important hints in the past. In 2003 and 2005, some papers presented have talked about the risks of derivatives, which later become the primary cause of financial crisis in 2008/2009. Then in 2010, Yellen predecessor, Ben Bernanke, first talked about 2nd Quantitative Easing which he implemented in the next few months. Thus, market players now are keeping Jackson Hole Summit on their sight.

 

Currencies On The Verge of Reversal?

The EURUSD and GBPUSD currently moves below the long-term trend tracker EMA-200, and we could see that the next moves are quite difficult to predict. From the Eurozone and the UK, there are several data releases scheduled for today, but the data are not expected to improve the regions' outlook. Preliminary German Manufacturing PMI is predicted to slip from 52.4 to 51.8. UK retail sales is expected to improve, but there is a 50:50 possibility that it is going to drop, because last quarter wages have slowed.

EURUSDEURUSD in H4 with EMA-200 (magenta), EMA-60 (blue), EMA-20 (red), and MACD

GBPUSDGBPUSD in H1 with EMA-200 (magenta), EMA-60 (blue), EMA-20 (red), and MACD


MACD for both the EURUSD on H4 and GBPUSD on H1 looked to be near its breaking point, and almost oversold. The two pairs could possibly bounce back on the smallest cause. But heavy reversal on the EURUSD seems unlikely. Although prices may bounce, EURUSD probably will stay under the EMA-200 lines.

On another case, the safe haven Yen has suffered on the absence of highly influential geopolitical discord. The fact that it has fly so high above EMA-200, however, signalled the possibility for this trend to last for a while. Japan decision makers have been unusually quiet, opens up the opportunity for price to move freely on the upside. Nevertheless, MACD of the USDJPY in timeframe H4 seems to be on the verge of overbought, so if you trade this pair, you should take care not to be trapped by a significant reversal.

USDJPYUSDJPY in H4 with EMA-200 (magenta), EMA-60 (blue), EMA-20 (red), and MACD


Last but not least, watch for news from Jackson Hole. There may be nothing, and there may be something. One thing you should remember is, if Yellen or her counterparts from other leading countries feels the need to disclose something, you would lose out on something important by ignoring the event.