Waiting game ahead of Jackson Hole, King Dollar, bitcoin edges higher

US stocks are rising as Wall Street tries to end a three-day slide by buying up big-tech stocks. ​ We are at an inflection point for the mega-cap trade as hedge funds position themselves for further weakness in bonds and a much weaker consumer as the economy slows. ​ Today’s rebound is small and on light volume, which means most traders are playing the waiting game until Fed Chair Powell’s Jackson Hole Symposium speech. ​ ​

All eyes on Powell​ ​

It is hard to be aggressive with any positioning until we hear from Powell on Friday. ​ A slower global growth environment is not going away anytime soon and now we are clearly seeing broader signs of weakness for the US economy. ​ The Fed still has a lot of tightening to do and that won’t change during the winter. ​ Powell’s fight against inflation might send the US economy into a recession late next year, but for now, he needs to stick to the hawkish script and leave all options of tightening on the table. What Powell needs to do is signal that rates will probably stay higher than what markets are thinking.

FX

The dollar has too much going its way and that won’t change anytime soon. ​ It seems a major move in the dollar may have to wait until Jackson Hole. Even if Powell caves into his true dovish self, whatever dollar rally that comes out of that will mostly likely be faded. ​ Until the energy crisis is stable and markets have an idea on when the EU will exit the upcoming recession, the euro will remain heavy.

Bitcoin

Bitcoin is benefiting with the broad return for risk appetite. ​ Albeit a small rally on low volumes, it is welcome news that could keep Bitcoin comfortably above the $20,000 level. ​ Jackson Hole will be massive for Bitcoin and if it paves the way for the Fed to remain aggressive with inflation, we will quickly see if the institutional money remains patient with their crypto bet. ​ The correlation with bitcoin and equities remains, but that may soon weaken if investors grow confident that the US may avoid a deep and painful recession. ​

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