The US dollar remains weak against Jackson Hole, USD/JPY and gold

Last US Dollar (DXY), USD/JPY and Gold

• US dollar weakens further ahead of the Fed chairman’s key speech
• USD/JPY seems technically weak
• Gold building on Friday’s record.

This year’s Jackson Hole Symposium — “Reassessing the Effectiveness and Transmission of Monetary Policy” — will be held Aug. 22-24, with Fed Chairman Jerome Powell’s keynote speech on Friday as the main attraction. Traders expect Chairman Powell to signal that the Federal Reserve will begin cutting interest rates in September, with financial markets currently pricing in nearly 100 basis points of rate cuts by the end of this year. With only three FOMC meetings left this year and the Fed normally moving in 25 basis point clips, a 50 basis point rate cut seems likely if market forecasts prove correct.

USD/JPY has been on a rollercoaster ride over the past month, falling 20 big digits in three weeks after the BoJ raised rates for the second time this year. The pair then rose nearly 10-digits on a rally in US dollar strength before falling last Friday and today to a weaker US dollar. USD/JPY’s next resistance area is seen between 151.45 (200-day sma) and a previous level of horizontal resistance has turned support just below 152.00. A renewed selloff will likely bring 140.28 into focus.

USD/JPY Daily Price Chart

Chart via TradingView

Gold finally broke through a stubborn resistance zone and hit a new all-time high on Friday. Expectations of lower interest rates and fears that the situation in the Middle East could escalate at any moment gave strong underlying supply. Support is seen at $2,485/oz. before $2,450/oz. while gold continues its upward price discovery.

Daily Gold Price Chart

Chart via TradingView

Retail trader data shows that 43.65% of traders are net-long, with the ratio of short-long traders at 1.29 to 1. The number of net-long traders is 11.99% higher than yesterday and 13, 24% lower than last week, while the number of Traders net-short is 5.76% higher than yesterday and 30.77% higher than last week.

We typically take a contrary view to crowd sentiment, and the fact that traders are net-short suggests that gold prices could continue to rise. The positioning is less short than yesterday, but longer than last week. The combination of current sentiment and recent changes gives us a new mixed trend for gold trading.