30.08.202110:17 Forex-elemzések és áttekintések: J. Powell briefly calmed the markets. Overview of USD, EUR, and GBP

Markets' positive reaction to the long-awaited speech of Fed Chairman J. Powell led to the growth of the US and European stock indices at the close on Friday, with commodity currencies being the winners. The optimistic mood was supported by the Asia-Pacific countries at the Monday opening. In addition, oil returned to levels close to the August highs.

The CFTC report showed a total increase in bullish sentiment for the US dollar. During the reporting week, the total long position rose by 7.563 billion, namely to 9.113 billion, which is the best indicator since February 2020.

The change is significant and reflects the growing confidence of investors that the US dollar is beginning a strengthening cycle, which will be supported by the Fed's appropriate actions. This confidence was largely based on expectations from the Jackson Hole symposium, at which it was assumed that the Fed through J. Powell will make it clear that the period has come for the beginning of the exit from the super adaptive policy, which is beginning to pose a threat to financial stability amid the rapid recovery of the labor market and rising inflation.

However, things didn't turn out as predicted. It is clear that Powell's speech was preceded by other Fed members, who, as a selection, turned out to be quite hawkish and practically formed the market's confidence that their expectations were being met, but he did not say what was expected of him. The head of the Fed calmed the markets, which manifested itself in the absence of strong movements on Friday and Monday opening. Powell focused again on the temporary nature of inflation and barely talked about the QE program, just confirming his readiness to start curtailing it and separated QE from rate increases.

The US dollar will be under pressure at the beginning of the week, but we expect the bulls to attack again. By the end of the week, strong Nonfarms and a return of expectations for the imminent curtailment of the Fed's stimulus can be expected, which will be reflected in the growth of demand for the US currency.

EUR/USD

Germany's post-appearance surge in economic activity is clearly fading, which is reflected in changes in indicators of economic activity and consumer confidence. In view of an increase in the cases of coronavirus and a slowdown in the pace of vaccination, fears of a new introduction of restrictions are growing. The Gfk consumer confidence index declined to -1.2, the IFO business optimism indices also show a slowdown.

The weekly contraction of the euro's long position amounted to 4.818 billion dollars. Its preponderance fell to only 3.6 billion, the weekly change against the euro is the largest since mid-2018. The estimated price is still below the long-term average, pointing in a downward direction.

In the previous review, it was assumed that EUR/USD would make an upward correction to the 1.1810/30 zone, and then the decline will continue. This target was reached, and, judging by the estimated price, there were no reasons for the continuation of the euro's growth over the week. We expect the formation of a local top and a downward reversal. The long-term target is 1.15, which is the most likely scenario. If the euro manages to consolidate above 1.1800/20, then the chances of a bullish impulse will increase. In this case, the target will shift to the 1.1910/20 zone, but this is still a less likely scenario for the euro movement than a downward reversal.

GBP/USD

Today is the UK's bank holiday, so the market is narrow for the pound. Sharp movements are possible only in case of any unexpected news. If there is no reason for movement, the pound will spend the whole day in a narrow range.

Tomorrow, the Bank of England will report on the dynamics of consumer and mortgage lending, which will allow adjusting forecasts for consumer demand, but so far, the situation looks like that the pound bulls failed to extract any dividends from the earlier opening of the economy in June, and the pound is essentially trading in full accordance with market mood.

The pound was actively sold during the reporting week. According to the CFTC, the sales volume amounted to 1.836 billion. A short position on the pound was finally formed, the estimated price went down from the long-term average, and the dynamics is clearly bearish.

It was assumed in the previous review that the upward correction may continue to the resistance zone 1.3770/90. This target has been reached, so sales may resume from the current levels. The most probable scenario is a return to sales with the target at 1.3610/20, and in this case, the development of a corrective bullish impulse is less likely. But if the pound manages to consolidate above the level of 1.3790, then the growth may continue to 1.3610/20, but we are still waiting for the resumption of sales in this zone.