A1 Trading Company

August 21, 2023

What to Expect From Jackson Hole Symposium

Frank Cabibi

Jackson Hole will be telling on what the Fed wants to do regarding monetary policy. Investors will be watching closely to see if there is going to be a change in Powell's approach on the current levels of inflation. Here are a few pairs we think are worth considering:

EdgeFinder Analysis

AU is at the bottom of the EdgeFinder as the scanner's most bearish asset. The pair is now at a -10 which means the Aussie dollar is beat by the USD in every way. Seasonality and trend readings agree. COT and retail are opposite of each other as well. All of the economic numbers are pointing to the USD for the time being.

Despite EUR's inflation being higher than the US, the dollar's CPI rose in last reports, suggesting more uncertainty around the Fed's policy. Although the Fed is transparent, their sentiment depends on what happens to inflation figures.

This might be pretty obvious to traders, but gold does not look optimistic. With the two year yield on the rise and Jackson Hole Symposium theories revolving around a restrictive Fed, the metal is under significant pressure.

On the 1D timeframe, price came up above the falling trend line for a brief moment before collapsing back lower. Price is currently back on a key support level, but is also showing significant selling pressure on this candle to the downside. A break under this level could lead to another test lower in the $1850s.

Here's a strong bearish reading from the EdgeFinder on the EURUSD pair. Retail seems pretty mixed as well as COT, but the pair has been struggling with recent pressure from the FOMC members meet up this week.

There are contradicting opinions between the bond market and stock market. The first is expecting another decline in the economic numbers and thinking there will be a series of four rate cuts to come. However, the latter is expecting another rise in rates this year.

Retail Spotlight

Retail still seems to be mostly short on indices like US30 and NAS100. Meanwhile, USD is also majority short with NZDUSD, AUDUSD, GBPUSD bullish and USDJPY baerish.

Smart Money Spotlight

Smart money likes the indices however. In fact, institutions are buying up more long contracts on the S&P and NAS. They have been doing this since early June, but price is not reflecting that recently. The question is whether they are buying into these dips for a higher move soon or they are wrong. Either way, the sentiment around stocks was heavily bearish to start the year, and now the sentiment is flipping to bullishness.

Fundamental Spotlight

One factor that's got analysts betting on more hikes is the economic growth in the US. Despite the rising interest rates, the economy has been pretty stable for the most part. It has led to higher inflation in CPI and is making volatility higher than normal.

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