In this largely data-void week, markets are likely to remain choppy. Many investors and traders are looking forward to the Jackson Hole Symposium which starts on Thursday, where heads of key central banks may provide clues about the path of their respective monetary policies. Ahead of the Jackson Hole, the US dollar's selling has paused for the time being. Having trended lower for much of this year, most of the bad news might be priced in. So without any fresh catalyst from either the US or elsewhere it may refuse to significantly fall further. Meanwhile sentiment towards the British pound remains negative and so if the dollar were to stage a more meaningful comeback then the GBP/USD would be the one to watch as it could drop heavily. At the time of this writing, the GBP/USD was testing last week’s low at 1.2830.
The FX markets may also find direction from the equity and commodity markets. Crude oil slumped yesterday but both contracts have bounced back a tad from their respective key technical levels, although this was having very little impact on the USD/CAD which at the time of writing was higher ahead of this afternoon's Canadian retail sales figures. Copper recovery continues and the Australian dollar remains largely in favour as a result, though the AUD/USD pair was down as a result of the US dollar recovery.
Stocks have also managed to stage a small recovery. Consequently, the perceived safe haven Japanese yen, Swiss franc and gold have all eased back. In the event of a dollar comeback and stock market recovery the USD/JPY and USD/CHF may find strong support. However if equities turn lower again then these dollar pairs could drop the most due to safe haven demand. Gold needs to climb above $1295 to $1300 resistance area in order to attract fresh technical momentum buying. If it manages to do that then this may attract the attention of the bears in the equity markets and in turn in the USD/JPY and USD/CHF FX pairs.
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