US Dollar Retreat, Wall Street Rally Lead APAC Equities Higher Ahead of Jackson Hole. Where To From Here?

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US Dollar, Nasdaq, AUD/USD, USD/CAD, PBOC, Jackson Hole – Talking Points

  • APAC equities higher after Wall Street lead and supportive China news
  • USD weakens against commodities and associated currencies
  • All eyes on Jackson Hole from Thursday.Will USD reclaim uptrend?

The Nasdaq led Wall Street to yet another record high in the US session and APAC equities gladly took the cue for a rally. JD.com results came out better than expected and this led to further tech sector support in Asia. The PBOC then added to the positive mood when they announced a boost to credit support to stabilize money growth.

Commodities also enjoyed a rally in Asia, with gold hitting a 2-week high and crude oil continuing its strong start to the week. Other standouts were aluminium and copper: both finished the Asian session higher.

The US Dollar continues to pull back from last week’s gains, and particularly so against risk-sensitive commodity-related currencies such as AUD and CAD. These growth-geared currencies have found support as concerns for dramatic winding back of monetary stimulus fade ahead of the Jackson Hole symposium on Thursday.

The perception is that since Dallas Fed President Kaplan repealed his hawkish stance, and we have not heard any other Fed speakers pushing another agenda. The market is interpreting this to indicate that the Fed is likely to remain accommodative for some time.

An outlier in US new home sales data may provide markets with some action, but the real focus remains on the end of the week and Jackson Hole.

US Dollar Index (DXY) Technical Analysis

USD bulls would have been disappointed with the pull back this week after breaking through the previous significant high at 93.43 and not seeing higher levels sustained. However, the DXY is still in an up-trend and could see further pullbacks and maintain the upward trajectory. A breach of significant support at the previous low of 91.80 would break that channel.

US Dollar Retreat, Wall Street Rally Lead APAC Equities Higher Ahead of Jackson Hole. Where To From Here?

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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