Look Ahead 24/8/23: EUR/USD on Jackson Hole

(Video Transcript)

UK durable goods data coming up

Welcome, time now to take a Look Ahead to some of the events to watch out for, for us traders on Thursday, 24 August and we begin at 1.30pm UK time where we get the release of what is quite often a very volatile number and it could actually swing from positive to negative quite easily in one reading.

Durable goods orders: we're looking there for a reading for the month of July, month to month, of a negative 4%. Now this is a wide range of goods that are bought on the market, it's anything from white goods for around the kitchen right the way through to aeroplanes, so there are some big swings potentially, depending on where some of the demand is coming through in some of those areas.

World's central bankers unite at Jackson Hole

Also at 1.30pm UK time we get the weekly jobless claims in the States, looking there for a figure of around 240,000 to be reported. Now also let's take a look as well at what's happening with one of the big swing points for the week I think and this is the Central Bankers Symposium in Wyoming at Jackson Hole.

It's where we hear from pretty much every single one of the major central bankers around the world and they debate the outlook. This time last year there were some wild swings in the market following on from the event which of course at the time was where rates were rising and there was every expectation that central banks would keep their foot firmly on the pedal.

This is a little bit different this year in as much as there is the temptation to believe that central bankers have pretty much done their work but in some areas there is still upward facing pricing and that is causing a headache certainly in some areas like Germany, for example, where there's some really dark economic data which is beginning to show there's the potential there for stagflation with prices rising and growth slowing as we know after having gone back down into recession in the winter months.

All eyes on forex

So, the Jackson Hole Symposium, what do we do? We look out for the foreign exchange markets most notably although it can also move the indices. This is the long term chart for the euro/dollar. I want to show you the individual daily charts and here we are now just before an hour or so before Wall Street gets under way on Wednesday so you get an idea as to the precise timing of this report.

You can see that we got this drop here today. Now there's some purchasing managers' index (PMI) data out in Germany today which has really hit the euro again and the euro has taken another step down and in fact it's gone down beyond this full retracement of this Fibonacci I've had here which was drawn on from the lows we had back on 6 July and it's resting on the 200-day moving average which in a part is significant.

In another video I've done, I've talked specifically about the impact of the German economy on this. I think one of the other aspects of this to watch out for is potentially further upside to the USD at the Jackson Hole Symposium when we have the Central Bank Chief Jerome Powell get up and speak and give an indication as to his thoughts about the future direction of interest rates.

There's certainly some that believe that perhaps maybe the Federal Reserve Bank (Fed) has another 25 basis points in its back pocket ready to fire from the markets at some point possibly mid September when it next meets but we'll have to see and there may be some more indications from Jerome Powell at that meeting. So certainly this is an area of the market to watch out for.

If you do get more dollar strength then you'd be short on this with a stop above recent price action your price target down as low as the low point we had here back on 31 May down at 106.35 so I think potential for downside is a possibility. I think if we see a continuation of weakness in the Euro Zone economies at the expense of further growth and potentially holding on to recent price rises in the States.

Hayes earnings due

Let's take a look at what's happening around the world corporate wise. Just one company of relative note to watch out for in the UK tomorrow morning, Thursday at 7am, when we get numbers out from the recruitment company, Hayes, fully earning. So it'll be interesting to see just what the year on year changes have been over the last 12 months because there has been a big move in the way in which companies are hiring staff.

They are still hiring but most notably this has been done through the temporary replacement market rather than ful- time job positions and I suspect that's what we could well hear from Hayes that the market is relatively buoyant but at the same time companies are not really likely to hire full time staff members rather going for short term contract workers.

So what do we look for for that? Well, it's the Hayes chart. That's the long-term chart. This is the chart showing you the individual daily movement and you can see the company's share price is bumping along the bottom. If we expand this out a little bit more you can see the highs that we've had back to September 2018, the Covid lows that we had here all the way down at 85 pence and this line of 98.8 pence is again hit and hit and hit again as an interesting line of interest.

Now in the last couple of days we are now halfway through Wednesday's trade so we're waiting on the numbers out on Thursday morning. If the picture is not particularly good I suspect we could well get this line of 98 pence challenged again. We're currently trading at 102. That's the potential downside.

If we do get an uplift and the company is making good money in the temporary recruitment sector around the world, which seems to be the way at the moment, then we could well see a little bit of an uplift in shares. They'd be capped out of this line up here which are recent highs at 108.4 pence.

It's been a week or so for US retailers and it continues. On the session on Thursday before the bell we get the cut price or discount retailer Dollar Tree coming through with its second-quarter numbers and we've seen time and time again that people when they are buying they're buying more often than not in the discount stores so Dollar Tree could well see a continuation of that.

And then we get Gap, the second-quarter numbers. We've just seen some numbers coming out from Footlocker which indicates that people are becoming more and more reluctant for discretionary spending and I suspect some of what Gap produces, in terms of what they have on the shelves, is deemed as discretionary. In other words, people steering around that rather either going to a discount retailer or just preferring to spend what little money they now have on things like food and fuel to help the family.

That's taking a look at what we've got in terms of some of the numbers to watch out for on Thursday. I'll be back at 7.30am tomorrow with the early morning call.