The euro starts to rise again after Jackson Hole

Key points of the article:

• Dollar continues to decline after Jackson Hole speech
• The psychological threshold of 1.2000 in jump-off

Dollar continues to decline after Jackson Hole speech

The US dollar continues to decline after Thursday’s speech by Fed Chairman J. Powell. The Fed is prepared to let inflation exceed the ceiling target set at 2% temporarily. The president of the Philadelphia Fed even mentioned a tolerance of up to 3%. The Fed is therefore adopting a more flexible view of inflation and will focus on the unemployment rate. This means that it is giving itself leeway to accentuate its accommodating policy if necessary and that its objective is more than ever to revive the economy.

Yet economic indicators were rather favorable to the greenback. US household spending in July rose + 1.9% m / m, more than expectations of + 1.6% m / m. In addition, revenues for July unexpectedly rose 0.4%, more than expectations of -0.2%. Finally, University of Michigan consumer sentiment for August was unexpectedly revised up from +1.3 to 74.1, higher than expectations of 72.8. Conversely, Chicago’s August PMI unexpectedly fell from -0.7 to 51.2, lower than expectations of +0.7 to 52.6.

But, the dollar is also neglected following the records which follow one another on the stock market indices, the investors abandoning the assets known as refuge like the American currency.

EUR / USD hit a new one-week high on Friday also due to improving confidence in the eurozone, after data on Friday showed the August Economic Confidence Index in the eurozone rose 5.3 to a 5-month high of 87.7, stronger than expectations of 85.0. Further stimulus in the euro area also gave EUR / USD a boost after the Dutch government announced on Friday that it would extend its Covid wage support program by 9 months and add 11 billion euros to this program.

The psychological threshold of 1.2000 in jump-off

The European currency broke a monthly bearish slant and hit a high of 1.1965 a stone’s throw from the psychological threshold of 1.2000. A breach would reach the September 2017 high at 1.2092.

Prices remain supported by the 20-day moving average, consistently closing above. The RSI however remains descending and pleads for further horizontal consolidation above the support at 1.1696.

Below this last threshold a real correction could take place.

EUR / USD price evolution in daily data:

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