FX Update: Choppy waters until Jackson Hole on Friday? FX Update: Choppy waters until Jackson Hole on Friday? FX Update: Choppy waters until Jackson Hole on Friday?

FX Update: Choppy waters until Jackson Hole on Friday?

Forex 4 minutes to read
John Hardy

Head of FX Strategy

Summary:  EURUSD swooned well through parity yesterday, posting a new low this morning before surprisingly resilient August preliminary PMIs helped to stabilize risk sentiment in Europe this morning. After a powerful strengthening move for the US dollar on a repricing of the US yield curve, we may risk a bit of consolidation and cat-and-mouse until the Friday main event(s) of the US PCE inflation release and Fed Chair Powell speech.

FX Trading focus: Treading water until Friday?

 Seeing some signs of consolidation in recent trends in places this morning as we see EURSEK rolling over after its steady recent ascent and EURCHF jerking back higher from new cycle lows on a stronger than expected set of preliminary August PMI’s, with Germany’s manufacturing survey at a solid 49.8, a nudge higher from the July level and far better than the 48.0 expected. The Germany Services survey was weaker than expected at 48.2 but is not the focus. For the Eurozone-wide survey, the manufacturing survey was likewise steady at 49.7 vs. 49.8 in July and vs. 49.0 expected. The resilient data didn’t suit the market action as EURUSD had plunged to new lows below parity yesterday and was posting fresh lows this morning just ahead of the releases. Given the scale and speed of the slide from above 1.0300 in EURUSD just over a week ago, it’s tough to argue that the USD will continue to move in a straight move higher as we await Fed Chair Powell’s speech at Jackson Hole. The title of the Jackson Hole conference is Reassessing Constraints on the Economy and Policy, which between the lines suggests the Fed is set to assess the reasons why it was so wrong and why it policy has little ability to affect the (a slightly more cryptic and academic version of the BoE’s recent throwing of the hands in the air at its own irrelevance, in other words).

A rather steep pace of declines for GBPUSD since the pair peaked out above 1.2250 in the wake of the late July FOMC meeting and then on the retest higher after the slightly softer US July CPI release on August 10. Cable managed to test new lows for the cycle this morning below 1.0760 before rebounding slightly and UK rates are off to the races again to new highs for the cycle after a firmer than expected preliminary August Services PMI suggesting moderate expansion. If the US dollar treads water for a couple of sessions ahead of Jackson Hole, there may be some room for the price action to consolidate – certainly a tough area to initiate a USD long position here below 1.1800 in risk/reward terms. Eventually looking for the pair to challenge lower still until either Europe finds some sudden source of relief on its energy emergency or the market begins to price the Fed to ease again (too early for the latter).

Source: Saxo Group

Elsewhere, the USDCNH rally extended to new highs this morning as the pair trades passively to USD direction. USDJPY has not yest posted new highs for the cycle as the comeback in longer US yields has been a relatively sluggish affair and we are still near 50 basis points below the cycle high in the US 10-year treasury yield benchmark of 3.50%, a challenge of which might be required to set USDJPY on tilt for 140+ and an eventual showdown over the BoJ’s commitment to its yield-curve-control policy – but keeping an eye out nonetheless as the market absorbs whatever message the Fed delivers this week.

Table: FX Board of G10 and CNH trend evolution and strength.
The USD positive reading intensifying here – mostly at the expense of EUR, GBP and SEK, but keeping an eye on the traditionally risk-correlated FX if sentiment continues to dive. Note the NOK riding above the fray – one of its most remarkable positive divergences from a downbeat set of European complexes and obviously driven by record gas prices.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
EURGBP flipped to positive on Friday, only to turn back lower yesterday on a sharp reversal – status looks confusing there. Elsewhere, watching AUDCAD for downside follow through while also watching whether USDCAD can break notably above the range or if it remains in the ugly choppy, rising channel of the last 12+ months (the closing price yesterday was the second-highest since late 2020). Look at NOKSEK at a reading of +7.1 – strongest trend within G10.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1100 – ECB's Panetta to speak
  • 1345 – US Aug. Flash Manufacturing and Services PMI
  • 1400 – US Aug. Richmond Fed Manufacturing
  • 1400 – Eurozone Aug. Flash Consumer Confidence
  • 1400 – US Jul. New Home Sales
  • 2300 – US Fed’s Kashkari (non-voter) to speak


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.