Powell’s message from Jackson Hole will define whether current bounce is correction or reversal
The Euro bounces back above parity level in early European trading on Thursday as traders collect profits from this week’s drop to the lowest levels since 2002.
Oversold daily studies and a double daily Doji (Tue/Wed) added to signals that bears ran out of steam and need to consolidate before resuming, though still need a confirmation on weekly close below parity as a minimum requirement, while close below former 2022 low (0.9952) would add to bearish signals.
Current bounce could be seen as positioning ahead of fresh acceleration lower as markets await the speech from Fed’s Chair Powell in Jackson Hole symposium on Friday, with expectations of 58.5% that the US central bank will remain in aggressive path and opt for another super-sized 0.75% rate hike, against 41.5% expecting 0.5% hike in September policy meeting.
In light of prevailing hawkish expectations, Euro’s bounce is likely to provide better selling prices for fresh push lower that would risk drop to Sep 2002 low (0.9607).
Conversely, the Euro may rise further if Powell disappoints markets by less hawkish than expected tone, with violation of pivotal barrier at 1.0079 (falling 10DMA / Fibo 38.2% of 1.0368/0.9900 bear-leg) to sideline bears and signal near-term bottom.
Res: 1.0033; 1.0079; 1.0134; 1.0152
Sup: 1.0000; 0.9961; 0.9900; 0.9853