Hawkish Fed Comments Driving USD

Bullard & Collins Support Further HikesAhead of the Jackson Hole Symposium today USDJPY is holding just below the YTD highs. USD is seeing fresh buying ahead of the event on the back of hawkish comments from Fed’s Bullard yesterday. The Philly Fed chief downplayed US recession risks and instead said that further tightening might well be needed to ensure inflation is driven back to target. While Bullard acknowledged that the Fed is near the end of its tightening campaign he voiced his support for further hikes as an “insurance” measure.Powell Comments Key for USDThese comments were echoed by Boston Fed chief Collins who said that the Fed might well be near the peak of its tightening though could not yet confirm if that peak was in. As such, Collins said that it might be prudent to tighten a little further. This was essentially the view to come out of the latest FOMC minutes and as such, the market is pricing in slightly more hawkish risk into Powell’s comments today. If the Fed chair is seen reaffirming this view, this will no doubt be taken by the market as a sign that a further hike is coming next month, sending USD higher near-term.Technical ViewsUSDJPYUSDJPY is currently hemmed in between the 145 level and the top of the bull channel. Momentum studies have weakened over the course of recent consolidation but, given the prior bull move, the focus remains on further upside for now with 151.83 the longer-run target. To the downside, 142.21 remains the key support to note.