Euro Set for Weekly Gain as Volumes Muted Before Jackson Hole

  • Traders remain sidelined before speeches by Yellen, Draghi
  • Overnight volatility in euro-dollar points to no suprises

BlackRock's Harrison Says Draghi Is in the ‘Hot Seat’

The euro reversed an earlier drop against the dollar and is set to extend a weekly gain during a quiet session overall as investors await key speeches by policy makers at the Federal Reserve’s Jackson Hole symposium.

In a repeat of Thursday’s price action, volumes were relatively low within all-familiar ranges as markets prefer to trade on headlines out of Jackson Hole rather than pre-emptively adjust their positioning. Corporate and short-term accounts have been mostly active in the euro and the pound, according to traders in Europe, who also noted that liquidity was lower-than-average again.

Market participants will scour speeches by Fed Chair Janet Yellen and European Central Bank President Mario Draghi for the prospects of monetary tightening when they speak on Friday in Jackson Hole, Wyoming. Option gauges suggest that traders look for the central bank chiefs to hold a balanced approach and refrain from surprising the markets.

One-day volatility in euro-dollar stood below its past-year average, a sign that market makers see the pair trading within a 1.1700-1.1900 range by New York cut-off on Monday.

  • The euro rises 0.2% to 1.1818 as of 11:47 a.m. London, gravitated by its 21-DMA; offers extend up to 1.1850, with stops and stop entries above, said the traders, who asked not to be identified as they weren’t authorized to speak publicly
    • Draghi speaks at 1 p.m. local time and liquidity is bound to be sub-optimal
  • Sterling was up a second day, yet it headed for its fourth consecutive weekly drop, its longest losing streak since January 2015
    • Cable rose as much as 0.3% to 1.2840; unless it manages a close above 55-DMA, currently at 1.2925, downside risks remain
  • The yen is on course to post its biggest weekly drop in almost two months against the dollar as haven demand has waned and investors trimmed their longs
    • USD/JPY rose 0.1% to 109.65, off its 109.77 day high; option related offers support the Japanese currency below 110.00, where $1.9b rollover Friday
  • BBDXY was down 0.2% as the dollar weakened against most of its G-10 peers; U.S. durable goods due later Friday
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