The FXCM USDOLLAR basket (top chart) maintains its weekly bullish channel between the blue and red bands. It will be interesting to see how it closes the week as we head toward Fed Chair Powell's Jackson Hole speech at 2:00 pm GMT.
The real rate (rr) middle chart will adjust according to his tone. We expect to see rr move into its upper channel if it's hawkish. However, any dovishness may send the yield downwards.
The bottom indicator is the correlation coefficient (cc) between the USDOLLAR and rr. It shows a strong correlation between the two at 0.8 (red rectangle). One of the reasons for this is that higher rates create uncertainty, which benefits the USDOLLAR due to its haven status. Therefore as rr adjusts, it will have a ripple effect on the greenback.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.