USDJPY Potential Bullish Momentum | 31st Aug 2021

Price is expected to move upwards out of this consolidation pattern, price is seen to be holding above the descending trendline resistance. Price is expected to rally up from the pivot level towards the 1st Resistance in line with the previous swing high and the 78.6% Fibonaaci extension level. Our bullish bias is further supported by the stochastic indicator, the K% line bounced off on the support level showing a strong upward movement. Alternatively, price might bounce downwards to the 1st support in line with the 61.8% Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/usdjpy-potential-bullish-momentum-or-31st-aug-2021"
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Market Spotlight: EURJPY Approaching Target

EURJPY Moving HigherThe EURJPY falling wedge pattern trade highlighted last week has now triggered with price having broken above the 129.59 level. While above here, the initial target is the 130.69 level with a broader target above at 132.02. The solid rise in the Nikkei this week has seen reduced safe haven support for JPY, allowing the pair room to trade higher in the near term. Weakness in the US Dollar (post Jackson Hole) is also helping here, with EUR benefiting more than JPY from the move so far. While the current dynamic continues, there is scope for EURJPY to continue higher in the near term.Key Data to WatchLittle in the way of key data for this pair this week. However a raft of EUR and JPY PMI readings over the week might have some impact. Looking ahead, however, the US labour reports on Friday are likely to be the main focus with some risk that current moves might fade out if USD recovers on a strong reading.

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In a “defined contribution” pension? Cheer up!

• SEE MORE Too embarrassed to ask: what’s the difference between a defined benefit pension and a defined contribution pension?

Twice a year, it seems, Treasury mandarins climb on their favourite hobby horse and urge the chancellor to reduce the tax breaks on private pensions. 

They leak their arguments to sympathetic journalists – probably over lunch at a Pall Mall club – and there follows a wave of gloomy articles about the dire outlook for members of “defined contribution” (DC) schemes, unlike in the Good Old Days of “defined benefit” (DB) schemes.

As someone who is approaching the statutory age of retirement but has never been a member of a DB scheme, I have a much more optimistic view of DC schemes. 

Why today’s pensions are better than the defined benefit schemes of old

Conventional wisdom has it that those of us with defined contribution pension schemes have it rough compared with those on defined benefit schemes. 

DC scheme holders pay in their contributions with no guarantees of what they’ll get out at the end of the period. Members of DB schemes, on the other hand, think (I use “think” for reasons that will become apparent later) they know what they'll get – a predetermined percentage of average or final salary. Who wouldn’t prefer the latter?

Yet for most of us, the latter is not an option. The majority of pension savers who are currently still working are now in DC schemes. 

According to the government, there are 23.2 million members of DC schemes and 17.8 million in DB and hybrid schemes. Only 3.4 million members of DB schemes are active (ie, still paying in), so 98% of benefits paid in the last quarter of 2020 were from DB schemes. 

This caused one pundit to conclude (and it’s a familiar argument, made by many): “You may not be as rich as your parents in retirement, because the lion’s share of money being drawn from pensions at the moment is from generous defined benefit schemes... there’s a risk today’s workers are being lulled into a false sense of security by the enviable lifestyles of many of today’s pensioners.”

Yet this is a misconception. As any economy grows, national wealth increases. The accumulation of wealth may disproportionately favour the better off – but rising income per person will mean that, on average, each generation is wealthier than the last. 

The indolent, the spendthrift and the unlucky will be exceptions – but most people will, much to their surprise, come to realise that they are better off than their parents, whether they inherit or not. This isn’t a prediction, it’s mathematics. 

OK, you might argue, but while it’s clear that rising real incomes make those in work better off than previous generations – what about in retirement? Surely DB schemes were better?

The “certainty” of private sector DB schemes was always an illusion

As a DC pension holder, I have to disagree. There are good reasons to prefer today’s DC pensions to the old DB model – within the private sector, certainly, where schemes have to be funded rather than paid for out of current taxation. 

For members of DC schemes, pensions are a function of contributions, the timing of them and returns.

The recipe for success here is straightforward: start saving early (by the age of 30), achieve consistently good investment returns, and let the compounding of returns over decades turn moderate contributions into a substantial nest egg. 

Keep your costs low – ideally by investing it yourself using a platform – trade as infrequently as possible (investment trusts are ideal) and forget about market timing. 

The returns in the good years will dwarf the drawdowns in the bear markets. In time, your chief worry will be the threat of rapacious taxation on excess returns.

Those who contribute less while working and so enjoy a better standard of living may have to tighten their belts in retirement. But even then, given that people are living longer and healthier than earlier generations, retiring later may be an attractive option for those with insufficient pension pots.

DB schemes, in theory, gave people certainty, but reality – for the private sector at least – was more complicated. Corporate schemes were used to encourage loyalty, favouring those who stayed over those who changed jobs or were made redundant. 

Later on, DB schemes were required to treat early leavers fairly and to increase pensions in line with inflation. But the cost of these changes made DB schemes unaffordable for the private sector. Funded schemes that have survived, like the Universities Superannuation Scheme (USS), have had to move from pensions based on final to average salaries, while employers have had to squeeze academic salaries to fund ever-rising costs. 

The key problem for any DB scheme is to ensure that it can meet its liabilities not just now, but decades into the future. Any deficit falls on the employer, who might face bankruptcy if it is not addressed. 

The calculation of a DB scheme’s current standing – and any deficit that needs addressing – is the job of the actuaries. But it produces bizarre results; a rise in bond yields and consequent fall in the value of both equity and bond assets will usually leave the scheme better funded, while rising valuations may put the scheme into crisis (at the risk of over-simplification, this is because falling interest rates increase the assumed value of future liabilities). 

The resulting deficit will not only force the trustees to demand higher contributions from employees and employers, but also to “de-risk” the portfolio. This means investing the portfolio so as to reduce the downside risk, but also the upside potential. The result is a doom loop from which, for example, the USS is struggling to escape.

DC schemes also offer flexibility

This is the key reason why DC schemes are better than DB. They can seek to maximise returns without worrying about the short-term downside risk, safe in the knowledge that market setbacks are highly likely to be recovered, and that most DC pension investors have time on their side. 

The better the returns, the less you will need to contribute. Higher returns for the same contributions will always make the DC scheme member better off than the DB. Framed in this way, it becomes clear that the “certainty” of a DB pension is an illusion, based as it is on uncertain future earnings.

DC schemes have other important advantages: members can tailor their risk to their age, prioritising returns early on, but protecting the downside as they approach retirement; they can manage the fund themselves or choose their manager rather than being at the mercy of someone more focused on the trustees and actuaries than them; and from the age of 55, they can withdraw 25% of their pension fund (up to a fixed limit) tax free and then, perhaps, invest the proceeds in ISAs. 

Following reforms introduced in 2015, retiring DC scheme members can also keep their pension pots invested, rather than having to cash them in to buy over-priced annuities. Instead, they can draw down from their pension pots as and when they need the money. This explains why pensions in payment from DC schemes are so low relative to DB payouts.

Finally, on death, DC pension pots can be passed onto the next generation; DB schemes pay a reduced pension to widows or widowers but then stop. 

There is one group of people, however, for whom DB schemes work well – the civil service. Theirs is, according to Which?, one of the most generous schemes of its kind, unfunded and guaranteed by taxpayers. 

So when those mandarins lobby for a squeeze on DC pensions, they do so from an ivory tower. But until they meet a chancellor too gullible, distracted or disgruntled to resist them, DC scheme members should relax.

from Moneyweek RSS Feed https://moneyweek.com/personal-finance/pensions/603768/why-defined-contribution-pension-better-than-defined-benefits-pension
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Market Spotlight: NIKKEI Channel Break

Nikkei Looking To Break OutThe current price action in the Nikkei is grabbing my attention this week. While the market has been in an ongoing decline over recent months, framed by the bear channel structure, bullish divergence has been growing. The latest break below the 27422.9 level has now reversed and price is breaking out above the channel top. If price can breach the 28356.6 high, this will mark a near term shift for the index, turning the focus to the 29464.9 level next.The Nikkei is being helped higher here by calls from Japanese PM candidate Fushida who is urging for a massive new stimulus package to help support the economy. Similarly, the weakness in USD following Powell’s Jackson Hole speech is helping keep the Nikkei turned higher.Key Data to WatchThe US labour reports at the top of the week will be the key focus for markets with any resultant USD strength likely to cap equities moves. However, any surprise weakness will keep equities well bid in the near term. Broader COVID headlines will also be key to follow this week with any fresh strength in JPY posing a risk to higher prices.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-nikkei-channel-break"
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The IndeX Files 31-08-2021

Equities Rally Following Powell SpeechIt’s been a solid start to the week for global equities benchmarks. Asset markets have been broadly higher in the wake of Fed chairman Powell’s Jackson Hole speech last week. Powell gave a considered and cautious speech, refraining from giving any immediate tapering signals, which ultimately disappointed bulls and saw USD trading lower. While the Fed chair acknowledged that tapering by year end will likely be appropriate, his message was still a balanced once, highlighting the residual risks and uncertainty within the bank’s outlook. As a result, there was nothing to suggest that the market should expect tapering any time ahead of December, keeping the near term outlook for equities markets bullish for now.Looking ahead this week, however, there are still big risks for equities traders. The next round of US labour reports on Friday will be closely watched. Following the bumper results seen for the prior month, if these readings come in above expectations also, we will likely see USD trading higher again near term, capping the current upside in equities markets. On the other hand, any weakness will likely see the current USD correction deepening, allowing for further upside in equities markets.Technical ViewsDAXThe recent retest of the 15743.01 level has seen the level continue to hold as support. Price has since turned higher once again is now close to challenging the 16015.97 highs. While RSI and MACD are turning higher here, it is worth noting bearish divergence into these highs, which suggest the risk of a pull back unless bulls can make a strong break higher here.S&P500The rally in the S&P has seen the index breaking firmly above the prior 4475.25 highs. With MACD and RSI both bullish here, the focus is on further upside in the near term, with the test of the bull channel mid point, the next technical area to focus on. To the downside, any slip back below the 4475.25 level will turn the focus to the 4383.50 level next.FTSEThe FTSE is continuing to struggle around the 7137 level with risks that, a failure here will mark a lower peak against the 7241 high, raising the risk of a deeper reversal lower. MACD and RSI are turned lower here and if we do break down, the 6968.7 level will be the next support zone to watch.NIKKEIThe Nikkei has seen a big move higher today with the index breaking out above the bear channel from YTD highs. Price is now fast approaching the 28356.6 level and with indicators turned higher here, the focus is on a breakout, putting the 29464.9 level in view as a target.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/the-index-files-31-08-2021"
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Games Workshop: real profits from fantasy games

Games Workshop (LSE: GAW) is a £3.8bn FTSE 250 company with a fine record of growth and profitability (see below). The firm’s business model is simple, at least in theory. It aims to “make the best fantasy miniatures in the world, to engage and inspire our customers, and to sell our products globally at a profit”, says the investor relations website. “We intend to do this forever. Our decisions are focused on long-term success, not short-term gains.”

More specifically, Games Workshop sells fantasy games such as Warhammer to a large number of devoted customers, both online via its own website and through more than 523 of its own shops and a further 5,400 independent outlets in 73 countries. The shops are not solely for buying: they play a key role in showing customers how to engage with the hobby of collecting, painting and playing with the miniatures, landscapes and wargames so they join the wargaming community. This activity helps recruit new customers to be long-term collectors and fantasy gamers. Special events at its Nottingham headquarters also help strengthen customer loyalty. 

Keeping it all in-house

The Games Workshop range includes more than 1,000 fantasy miniature models, landscapes, wargames and other products, and the company is continually adding to that. The design studio in Nottingham now employs 262 people and develops its own range of paints, brushes and painting systems for the many customers who personalise their miniatures. The emphasis is on high quality, so miniatures are manufactured in-house in the UK rather than subcontracted to Asia. In 2020/2021, it invested £30m in research and development (R&D), amounting to a high 8.5% of sales. This long-term, quality approach with substantial R&D investment is an attractive feature of the company.

Growing online and abroad

Games Workshop has four streams of revenue and profit. These are its own shops (retail), independent shops (trade), online and royalties (from licensing its intellectual property). The 2020/2021 revenues and the growth over the previous year for these four streams were: trade £194.8m (39%), retail £70.7m (-9.4% due to shop closures), online £87.7m (+69.6% rise, reflecting shop closures) and royalties £15m (-5% and all profit). The three main areas with potential for growth are overseas markets, online sales and expanding royalties. Company-owned shops number 138 in the UK, 161 in North America, 153 in continental Europe, 49 in Australia and only 22 in Asia. Given relative populations, there is clear potential for expansion in North America and Europe and particularly Asia. The firm completed a new warehousing system in Memphis during the year and this dramatically increased US capacity, but even this has not been able to keep pace with demand in recent months – a measure of the overseas growth potential. 

The big online sales increase has also strained the company’s systems and so a major IT project has been started to upgrade and enhance the website and its customer experience. This should grow sales further. Other online ventures include an eagerly awaited new subscription service called Warhammer+, which launched this week.

Exploiting intellectual property

Finally, Games Workshop already has a vast range of books and audio books to accompany the wargames. But the firm plans to invest in getting this rich intellectual property in front of new audiences beyond the table-top gaming market. Licensing has good growth potential with nine video games launched during the year and another 15 under development.

Other projects are under discussion with the entertainment industry, ranging from Hollywood studios to the Japanese animation sector. In 2019 Games Workshop and Big Light Productions announced that Frank Spotnitz (who produced The Man in the High Castle and The X-Files) will be executive producer of a new live action Warhammer TV series. A whole new area can now be mined to increase royalties.

A very robust and fast-growing business

Games Workshop has more than doubled its revenue over the last four years and enjoys high operating profit margins of 43% of sales. Its performance during the pandemic has also demonstrated that it is a remarkably resilient business.

Revenue for the 2018-2019 year (ie, ending May 2019) was £256.6m. This rose slightly to £269.7m for 2019-2020, followed by a stronger increase of 31% to £353.2m for 2020-2021. Given that many of the company’s shops were closed for much of this time, that’s an impressive result. Operating profit was £81.2m for 2018-2019 rising to £90m for 2019/2020 and then increasing 68.6% to £151.7m for 2020/2021. Free cash flow was £103m with net cash at the end of the year of £85.2m. 

The company has consistently increased earnings per share (EPS) faster than revenue. Revenue was up 62% from 2016-2017 to 2018-2019, but EPS was up by 114%. For 2018-2019 to 2020-2021, the figures were 38% (revenue) and 84% (EPS). If revenue were to rise by another 38% to 2022-2023 and EPS increase by 70%, then EPS would then be 634p. The price/earnings (p/e) ratio of 31.9 at the recent share price of 11,670p would then drop to 18.4 for 2022-2023. With dividends of 235p declared for 2020-2021, the current yield is 2.01%.

from Moneyweek RSS Feed https://moneyweek.com/investments/stocks-and-shares/share-tips/603763/games-workshop-real-profits-from-fantasy-games
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Investment Bank Outlook 31-08-2021

CIBCFX FlowsSpread for 10-year AU-NZ yields widened a little after market opened at 0.685 from 0.665, small pressure on the AUDNZD and eventually, took out the 1.04 barrier. We saw bids 1.0402-05 and I suspect someone pulled them, obviously someone had stops in either AUDNZD or NZDUSD. In nano-seconds, AUDNZD fell from 1.0397 to 1.0348, while the NZDUSD took off from 0.7011 to 0.7053. This is not news driven. Do note this is a 2-year low for AUDNZD, our trader Jon said it would be mad to be selling down here.NZDUSD slipped back after a very quick move to 0.7053. We think this is all market positioning. Earlier, New Zealand July home-building permits rose 2.1%, we saw a higher revision in June to +4.0% from +3.8%. This had no impact on FX. IMM report showed that positioning is flat while Monday data showed leveraged names have turned to small short.It has been a tight range for AUDUSD, speculators are trapped between AUD demand from corporate accounts linked to dividend payments and weakness in AUDNZD cross. Weak commodity prices plus soft Chinese PMIs didn’t help much.EURUSD moved higher but it has been slow and steady. Some resistance seen at 1.1810, the 50-day SMA, I think we might get a chance later, break of that could see EUR heading to 1.1865. Earlier today, ECB Governing Council member Holzmann said 4th wave of the coronavirus will probably have marginal impact on economic output in Austria and sees inflation rate down again later this year and next. Our traders see the pair to range 1.1772-1.1822 for the session.With AUD and oil futures are under pressure and the USDCAD goes bid. We also witnessed good demand in EURCAD from Canadian name. USDCAD kicked off at 1.2605, has risen to 1.2625. Offers are light, not much upside strikes too. Downside, strike at 1.2575 matures today for $660mio and 1.2560 for $1.22bn.Credit AgricoleMonth EndGlobal equity markets were broadly firmer in August. In FX, the USD was broadly stronger on the month. Overall, the moves in equity markets, when adjusted for market capitalisation and FX performance this month, suggest month-end portfolio-rebalancing flows are likely to be mild USD selling across the board with the strongest sell signal in the case of the USD vs SEK. n Our corporate flow model is pointing to EUR/USD selling at the end of the month. In our combined strategy, we therefore use the signals of the stand-alone month-end rebalancing model.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-31-08-2021"
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Dollar Weakens as Key Nonfarm Payrolls Release Looms

from Forex News https://www.investing.com/news/forex-news/dollar-weakens-as-key-nonfarm-payrolls-release-looms-2603675
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Market Update – August 31

Market News Today 

Treasuries extended gains overnight. The advent of month-end with a large duration extension, momentum from the break of 1.30% on the 10s, and the lack of supply, and covid worries have underpinned. Concurrently, stocks firmed led by a 0.9% jump in the USA100 and a 0.43% gain in the USA500, both at fresh record highs of 15,265 and 4528, respectively. The USA30 lost altitude and closed with a -0.16% loss. Signs that China’s economy is struggling thanks to virus measures and the regulatory clampdown, weighed on the market.

• China’s official PMI readings meanwhile showed the manufacturing number dipping to just 50.1, while the services reading fell back into contraction territory for the first time since early last year, at just 47.5.
• Japan’s jobless rate unexpectedly improved, but factory output declined, as did Australia building approvals.
• The Delta variant is leaving its mark also on economies across the region. Covid surges in US.
• EU to reimpose travel curbs to US.
• USD (USDIndex 92.45) weakened as there is no clear signal on the Fed’s tapering timeline.
• Equities are mixed as Topix and JPN225  managed to rise 0.7% and 1.2%respectively also helped by stronger than expected retail sales numbers
• Overnight – USDJPY fell back to 109.81. The  Yen declined against most other currencies though. NZDUSD Jumps to 0.7062. NZD and AUD strengthen as lockdowns in the NZ were seen successfully lowering new COVID-19 infections, while the Aussie was stronger after building permits raised hopes its economy could avoid recession.
• USOil is trading at $69.14 as traders assess the prospect for an easing of output restrictions ahead of the OPEC+ meeting. Hurricane once off, aghanistan small impact, hurricane this wee and done, and they dont go that far north
• Gold rose to 1,819, Platinum down over 4%, Silver down 5.4% for the month, Palladium heads for worst monthly performance in seven

Today – Calendar includes Eurozone inflation, German unemployment, Canadiam GDP for Q2 and the US Consumer Confidence.

Biggest Mover @ (06:30 GMT) NZDUSD (+0.94%) Spikes to 0.7062 from 0.6995. IT retests 3-month Resistance area at 0.7000-0.7100. Faster MA’s aligned higher. The MACD signal line & histogram rising. RSI at 78 and rising. H1 ATR 0.0012, Daily ATR 0.0065.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /266843/
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Dollar Up, but Near Two-Week Lows as Fed Taper Uncertainty Continues

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Dollar near 2-week low as investors look to U.S. jobs data

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Best Emerging Currencies Lose Steam as Rate-Hike Bets Wane

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EURUSD: Eyes on 1.1900 or 1.1700

Treasuries and Wall Street futures are higher, albeit fractionally, after Friday’s rally on Fed Chair Powell’s comments that seemed to take QE tapering off the table near term. The 10-year Treasury yield trades at 1.305% with the 2-year at 0.215%. It is a little more of a mixed picture in overseas markets.

ECB’s Villeroy added to signs that the ECB will discuss monthly asset purchase levels at its September meeting. Also, Eurozone ESI economic confidence and the Swiss KOF indicator came in weaker than anticipated, but still pointed to ongoing robust growth, while inflation data for Spain and Germany showed another pick up in annual rates. Core European bourses are firmer with the GER30 0.19% higher.

Inflation lifts in Germany and Spain. The Spanish HICP rate came in higher than anticipated at 3.3% y/y in preliminary readings for August. German data is due during the European PM session, but state data already released also pointed to a slightly higher national CPI rate, which already stood at 3.8% y/y in July. The HICP rate was expected to hit 3.4% y/y, but could come in a tad higher still. Base effects also from Germany’s temporary cut to the VAT last year, continue to play a role and we agree with the ECB’s assessment that headline rates will normalise again next year. Still, against the background of sharply higher import prices and ongoing disruptions in global supply chains, there is some risk that the overshoot could prove to be more sticky than officials currently assume. With the ECB set to confirm next week that the economy will hit pre-crisis levels at the end of the year, the data will add to the arguments of the hawkish camp at the ECB and backs expectations that monthly purchase volumes under the PEPP program could be scaled back again to the levels seen in the first quarter of the year.

In the currecy market, the US Dollar has remained heavy in the wake of Fed Chair Powell’s refrain from signalling a policy tapering schedule on Friday. Powell, while still acknowledging tapering could be “appropriate” this year, also downplayed the risks of inflation, seemingly pushing back against the increasingly vocal hawks who had been out in force last week. EURUSD edged out a 24-day high at 1.1810.

Friday’s closing of EURUSD along with further rally today, is key as the asset closed above the 20-day SMA and flirts once again with the psychological 1.1800 level. If the asset manage to sustain its recent rally along with a breakout of the 23.6% Fib. retracement from May’s downleg but more precisely the 50-day EMA at 1.1825 , then further optimism could be raise. This could lead 2-month highs. However this is a key challenge for the asset which as coincides with 200-day EMA and 38.2% Fib. level at 1.1907.

Any reversal at this point could resume the downards channel seen snce June, something that looks likely for now, as momentum indicators are abide by price action. The daily RSI is looking to extending higher since early august but still remains close ot 50 barrier implyinh to a ranging market. The MACD holds below neutral zone but signal line and MACD lines are close to it, both suggesting that downside risks have not entirely faded yet.

Longer-term risks remaining to the downside for EURUSD, given the favourable expected US growth rate and larger associated fiscal stimulus compared to the eurozone.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /266495/
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NFP Report will Decide the Fate of September Fed QE Announcement

Powell stuck to the hawk line in Jackson Hole last week, but avoided specifics to allow himself room for maneuver at future meetings. The Fed chair hinted at the possibility of QE tapering start this year, which the markets apparently interpreted as sure event. The question is when the QE announcement will be made - in September or towards the end of the year. September shift in the Fed policy is likely to require a strong upside surprise in the August Non-Farm Payrolls report.Majority of Powell peers at the Fed spoke in favor of making an announcement on QE in September and saying goodbye to the asset-purchase program already in the 1st or 2nd quarter of 2022. However, Powell opted for cautious stance saying that it "might" be appropriate to start trimming the Federal Reserve’s activity in the Treasury and MBS markets this year, with a decision based on incoming data and delta strain dynamics in the US in the fall.Powell acknowledged that the recovery is happening faster than expected and that inflation in the United States has taken off. At the same time, there is no guarantee that its temporary nature cannot change to a permanent one.What cheered the markets and hit the dollar is comments of the Fed chair on employment, interest rate path and risks of a premature policy change. Powell said that in a weak labor market, early tightening could hit economic activity and employment, undermining all the gains from stimulus policy. In addition, he said that changes in QE shouldn’t be viewed as a signal of the Fed intentions regarding the timing of a rate hike, which also greatly disappointed proponents of the Fed hawkish policy stance.Relatively dovish position of the Powell last week led to broad dollar sell-off with EURUSD rising to two-week high of 1.18. The pair scored 8 winning days out of 9 as the liftoff began thanks to synergy of buyer interest as can be seen from the intersection of lower bound of the downside trend channel and strong annual support area 1.1650-1.17: This week the Eurodollar is to challenge the upper border of the short-term trend channel. Considering vast of unused upside momentum on 1D timeframe with RSI at ~ 52 points, support of both short-term and medium-term buyers, there are high chances of a breakout before the NFP The nearest target for bulls resides in horizontal resistance zone of 1.1880 - 1.19. However, in the medium term, the pair remains in a downtrend. This can be seen from the downward slope of the annual trendline starting from 2021. It follows from this that holding gains above 1.19 will be difficult as ECB outlook remains pretty dovish. A negative NFP surprise is likely to fuel dollar sales boosting EURUSD recovery towards 1.20 as expectations for the announcement of QE tapering will move to the end of the year.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/nfp-report-will-decide-the-fate-of-september-fed-qe-announcement"
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