De-risking Ahead of Fed Chair’s Jackson Hole Speech

Explore the swift market reversal post Wall Street gains, de-risking actions, and Asia’s response to Jackson Hole impending speech.

Market Recap

The financial markets underwent a swift reversal as initial Wall Street gains gave way to a sell-the-news reaction driven by Nvidia’s impressive results. Market participants are taking precautionary steps to de-risk ahead of Fed Chair Jerome Powell’s impending Jackson Hole speech, leading to a 7.6% rise in the VIX due to increased hedging activities.The focus on the Fed’s policy outlook looms large, with attention directed at its data-dependent stance, progress in US inflation, and its potential impact on market sentiment. Powell’s emphasis on these factors could sway the perception between hawkish and less hawkish views, highlighting the risks of demand resurgence and advocating sustained higher rates.

De-risking Ahead of Fed Chair’s Jackson Hole Speech

Brent crude prices draw interest as dip buyers strive to defend the neckline of a head-and-shoulder formation, with the possibility of a more bullish stance requiring a move beyond the 85.40 level. Conversely, if the head-and-shoulder neckline at 82.70 breaks down, the 78.20 level becomes a key area to watch.

Asia Session Update: Markets React to Powell’s Speech

Asia’s negative open is evident: Nikkei -1.55%, ASX -1.05%, KOSPI -0.81%. Anticipation of Powell’s remarks triggered de-risking due to Fed minutes’ lack of consensus.
Nasdaq Golden Dragon China Index down 0.7%, challenging oversold Chinese equities’ recovery. Hang Seng’s inability to sustain RSI above 50 implies caution.
Tokyo’s August CPI data: headline inflation moderates to 2.9% from 3.2%, ‘core-core’ rises to 2.6% from 2.5%. USD/JPY influenced by hawkish Fed, strong US dollar.
AUD/JPY shows a near-term descending triangle, potential for broader bullish pennant with retracement to 38.2% Fibonacci. EUR/USD pressured to new two-month low.
EUR/USD grapples with USD pressure, tests 200-day MA. Weekly RSI retests key 50 level, fate depends on MA-line defense against sellers.
1.080 level crucial for EUR/USD support; breach may lead to 1.063 test, trading below 200-day MA since Nov 2022.

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