Corrective Pressures Give The Greenback A Reprieve

Yesterday's price action left a potential bearish shooting star candlestick in the euro, and follow-through selling saw it approach $1.1850 in early European trading today. The $1.1880-$1.1900 offers the nearby cap. The lower end of the range in the second half of August is around $1.1750, and that seems to be the risk. Given the recent string of US data, including yesterday's ISM data, and the proximity of Friday's jobs report, the dollar bears are likely to be restrained, not to mention next week's ECB meeting. Sterling posted a similar potential candlestick yesterday after approaching the $1.35 technical objective. It has fallen back to around $1.3325 in late Asian turnover before finding better bids in the European morning. Monday's low was closer to $1.3300, and that is where better support may be found  Initial resistance is seen near $1.3375 now.  


Although many think that Federal Reserve Governor Brainard had an "Emporer is not wearing clothes" moment in a speech yesterday. "Had the changes to monetary policy goals and strategy we made in the new statement been in place several years ago, it is likely that accommodation would have been withdrawn later, and the gains would have been greater, she said regarding minority employment. It is hardly a state secret that in tight labor markets, employers hire people they would not usually hire. The fact of the matter is that when unemployment hit a 50-year low last year, so did the gap between white and black unemployment. 

 It is not just as Brainard says about a few years ago, but the same argument applies since 2012 when the Fed first adopted a formal inflation target. Part of the purpose of an inflation target was to narrow the scope for idiosyncratic elements in the setting of monetary policy. Purposely not defining the period that "the average" inflation is to apply, the Fed eschews the confines of rule-based decision making. Also, race-based disparities overlap in America with class-based disparities. The latter is not being addressed, and in practice appears to be a critical comorbidity, even though the old Humprey-Hawkins legislation that modernized the Fed's charter recognized this element. Even though Brainard stopped shy of endorsing a bill in Congress to add racial equality to the Fed's mandates, which Biden appears to have supported, she is a likely candidate for Treasury Secretary in a Democratic administration. 

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Read more by Marc on his site Marc to Market.

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