US Dollar Remains Weak Ahead of Jackson Hole, USD/JPY and Gold Latest

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

• US dollar weakens further ahead of key Fed chair speech
• USD/JPY looks technically weak
• Gold consolidating Friday’s record high.

This year’s Jackson Hole Symposium – “Reassessing the Effectiveness and Transmission of Monetary Policy” – will be held on August 22-24 with Fed chair Jerome Powell’s keynote speech on Friday as the main attraction. Traders expect chair Powell to signal that the Federal Reserve will start 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 with the Fed normally moving in 25 basis point clips, one 50 basis point rate cut is looking likely if market predictions prove to be correct.

USD/JPY has been on a rollercoaster ride over the last month, shedding 20 big figures in three weeks after the BoJ hiked rates for the second time this year. The pair then rallied by nearly 10 big figures on a bout of US dollar strength before dropping last Friday, and today, on a weaker US dollar. The next area of USD/JPY resistance is seen between 151.45 (200-day sma) and a prior level of horizontal resistance turned support at just under 152.00. A renewed sell-off will likely bring 140.28 into focus.

USD/JPY Daily Price Chart

Chart via TradingView

Gold finally broke through a stubborn area of resistance and posted a fresh all-time high on Friday. Expectations of lower interest rates and fears that the situation in the Middle East could escalate at any time have given a strong, underlying bid. Support is seen at $2,485/oz. ahead of $2,450/oz. while gold continues its price discovery on the upside.

Gold Daily Price Chart

Chart via TradingView

Retail trader data shows 43.65% of traders are net-long with the ratio of traders short to long at 1.29 to 1.The number of traders net-long 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 contrarian view to crowd sentiment, and the fact traders are net-short suggests gold prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed gold trading bias.