Daily Report: Risk Appetite Sent S&P 500 to Record, Yellen Awaited

Risk appetite was strong this week as SP 500 finally surged to close at new record high of 1992.37. DIJA also reclaimed 17000 handle and closed at 17039.49. Asian equities, though, are mixed as Nikkei pared back earlier gains and is trading in red at the time of writing. In the currency markets, dollar is consolidating this week’s FOMC minutes inspired gains for the moment and is staying firm against other major currencies. Investors are awaiting Fed chairman Yellen’s speech in the annual Jackson Hole symposium today. Traders are looking for some additional bullets from Yellen to boost the greenback further higher.

A key focus on Yellen’s speech will be on her assessment on the health of the labor market as the topic of this year’s symposium is “Re-Evaluating Labor Market Dynamics”. The more hawkish than expected FOMC minutes released earlier this week boosted the greenback higher. They unveiled that policymakers had detailed discussion of the exit strategy and would probably release the detail sin September. The FOMC members acknowledged the improvement in the job market. And staff lowered the unemployment rate forecast in response to the faster decline in the unemployment rate. Eyes will be on whether Yellen’s comments today would reinforce the current dollar sentiments, or rather, cool it down.

Talking about Fed, Kansas Fed George said when the economy was getting closer to full employment and stable inflation, the time has come for rate hike. And she didn’t want Fed to be “behind the curve” in normalization of interest rates. She noted that data were “stronger than expected” and “some of the policy benchmarks that we looked at and have been looking at for some time are already signaling that we should be above zero interest rates.” San Francisco Fed Williams, on the other hand, said that “a rate hike some time in the middle of 2015 seems reasonable” based on current economic outlook.

Elsewhere, the economic calendar is rather light today with focus mainly on Canadian data, including consumer inflation and retail sales.

Daily Pivots: (S1) 0.9269; (P) 0.9293; (R1) 0.9312; More…

AUD/USD recovers quickly after dipping to 0.9236 and intraday bias is trend neutral again. With 0.9346 resistance intact, another fall is still mildly in favor. The rejection from 55 days EMA raised the chance of deeper fall. Below 0.9236 will target 38.2% retracement of 0.8659 to 0.9504 at 0.9181 and possibly lower. Though, break of 0.9236 will indicate near term reversal and turn bias back to the upside for 0.9475/9504 resistance zone.

In the bigger picture, price actions from 1.1079 are viewed as a medium term correction. Recent development argues that it’s possibly finished at 0.8659 on bullish convergence condition in weekly MACD, ahead of 50% retracement of 0.6008 to 1.1079 at 0.8544. Rebound from there would extend higher to 38.2% retracement of 1.1079 to 0.8659 at 0.9583 first. Sustained break there will confirm this case and target 61.8% retracement at 1.0155 and above. However, break of 0.9080 near term support will dampen this bullish view and would likely extend the correction from 1.1079 to a new low.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
12:30
CAD
CPI M/M Jul

-0.10%
-0.10%

12:30
CAD
CPI Y/Y Jul

2.40%

12:30
CAD
BoC CPI Core M/M Jul

0.00%
0.10%

12:30
CAD
BoC CPI Core Y/Y Jul

1.80%

12:30
CAD
Retail Sales M/M Jun

0.60%
0.70%

12:30
CAD
Retail Sales Less Autos M/M Jun

0.60%
0.10%

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