Dollar Gains Ahead of Powell’s Jackson Hole Speech

Key Takeaways:

*Greenback gains against G7 peers, with EUR down 0.4% and JPY down 0.73%, as markets brace for Powell’s Jackson Hole speech.

*September rate-cut odds drop to 70% from 90% on hotter inflation data and hawkish FOMC signals.

*Wall Street extends losses, with the Nasdaq down 2.45% this week; a hawkish Powell could deepen equity weakness.

Market Summary:

The U.S. dollar strengthened against its G7 peers in yesterday’s session, with the euro slipping 0.4% against the greenback, while the dollar advanced 0.73% against the yen. Traders are positioning for a more hawkish stance from the Federal Reserve ahead of Chair Jerome Powell’s keynote address at the Jackson Hole Economic Symposium, scheduled for Friday at 10 a.m. New York time.

Expectations for a September rate cut have cooled sharply. Futures markets now price a 70% probability of a 25-basis-point cut, down from 90% a week earlier. The repricing was driven by a hotter-than-expected inflation print and the latest FOMC minutes, which signaled that the Fed may keep rates elevated for longer to combat persistent inflation risks.

Hawkish commentary from Fed officials has further reinforced this sentiment. Cleveland Fed President Loretta Mester noted she would not support a rate cut if the decision were made today, while Atlanta Fed President Raphael Bostic reiterated his expectation for just one rate cut this year, a stance echoed by several of his colleagues.

The shift in rate expectations weighed on risk assets, with Wall Street’s major indices extending losses into Thursday. The Nasdaq has fallen 2.45% this week, while the S&P 500 and Dow also face sustained pressure. Should Powell deliver a hawkish message at Jackson Hole, the dollar could find further support, while U.S. equities may remain under strain.

Technical Analysis 

DOLLAR_INDX, H4:

The U.S. Dollar Index (DXY) extended its recent advance during the session, decisively breaking above significant technical resistance at the 98.40 level. This upward move reinforces a firmly bullish near-term bias for the greenback against a basket of major currencies. The broader bullish trajectory for the index remains intact provided it maintains its position above the ascending trendline support that has defined its upward channel.

The move is supported by strengthening momentum conditions. The Relative Strength Index (RSI) is approaching overbought territory, a sign of strong buying pressure, while the Moving Average Convergence Divergence (MACD) indicator has crossed definitively above its zero line. This technical signal confirms that bullish momentum is accelerating, increasing the likelihood of further near-term gains.

Resistance Level: 98.80, 99.30

Support Levels: 98.00, 97.55

Nasdaq, H4:

The Nasdaq Composite Index remains under pressure, trading near weekly lows around the psychologically significant 23,000 level. The index has breached a key technical threshold, falling below the 61.8% Fibonacci retracement level at 23,175, while a bearish crossover has materialized as the short-term simple moving average declined below its long-term counterpart—further affirming the prevailing downside bias.

Despite these bearish signals, the index is showing tentative signs of stabilization as it approaches a critical support zone near 23,000. A sustained hold above this level, particularly if it forms a triple-bottom reversal pattern, could signal a potential bullish reversal and mark a meaningful inflection point for near-term momentum.

Momentum indicators are offering early, though cautious, signals that selling pressure may be easing. The Relative Strength Index (RSI) is hovering near oversold territory, suggesting the potential for a technical bounce, while the Moving Average Convergence Divergence (MACD)—though still below its zero line—is nearing a bullish crossover, often referred to as a “golden cross,” at depressed levels. Such a development could provide additional confirmation of a near-term trend reversal.

Resistance Levels: 23,280.00, 23,475.00

Support Levels: 23,015.00, 22,755.00