LOOK AHEAD: US Macro Week Ahead: PCE With Annual Revisions and Payrolls (1/2)

• RES 4: 1.4175 High Jul 13
• RES 3: 1.4129 High Jul 28  
• RES 2: 1.4080 High Aug 4 and 5 
• RES 1: 1.3914/1.3966 20- and 50-day EMA values  
• PRICE: 1.3876 @ 17:10 BST Aug 26
• SUP 1: 1.3732 Low Aug 21
• SUP 2: 1.3715 76.4% retracement of the May 1 - Jun 24 bull cycle
• SUP 3: 1.3672 Low May 12
• SUP 4: 1.3620 Low May 7

A bear theme in USDCAD remains intact and short-term gains are - for now - considered corrective. A fresh short-term cycle low last week confirmed an extension of the bear leg and this reinforces current conditions. Key resistance to monitor is 1.3966, the 50-day EMA. Scope is seen for a deeper retracement of the May 1 - Jun 24 bull leg. 1.3817, 61.8% of the May 1 - Jun 24 downleg, has been breached. This opens the 76.4% level at 1.3715.   

 The questions that we have selected for Chair Warsh’s speech at Jackson Hole Friday (due at 1000 ET) are:

• Does Warsh comment on the current outlook for monetary policy?
• Does Warsh mention possible rate hike(s) without mentioning possible hold or cut(s)?
• Does Warsh mention possible rate hold without mentioning possible hike(s) or cut(s)?
• Does Warsh mention possible rate cut(s) without mentioning possible hikes or holds?
• Does Warsh reference scenarios and/or all policy outcomes being on the table?
• Does Warsh mention the possibility of reducing number of yearly policy meetings?
• Does Warsh say current policy is not sufficiently restrictive?
• Does Warsh say higher bond yields or tighter financial conditions reduce the need for tightening?
• Does Warsh suggest that headline PCE could be replaced by trimmed mean as the Fed's inflation target?
• Does Warsh discuss reducing the size of Fed’s balance sheet?

Note: Questions are subject to change before Friday, updates will be published on MNI’s bullets feed/website

MNI’s Instant Answers for the speech covers a wide range of possible topics given the uncertainty over which direction it will take. We will first want to know whether Warsh comments at all on the current outlook for monetary policy; if he does, most attention will be on whether he discusses directionality in rates.

• If we do get a Powell-esque "traditional set up" for the upcoming policy meetings, we'd expect Warsh to remain typically enigmatic and brief, but to reiterate the Committee's pledge to deliver price stability with reference to its ongoing assessment of data trends, to keep options open in the coming months.
• He may choose to refer to the scenarios named in recent meeting minutes without providing a clear steer (July: “With regard to the outlook for monetary policy, participants reiterated that their interpretations of incoming information would be a key component of their deliberations.”)
• In a more impactful version of this, he could mention that the FOMC retains the ability to shift policy as necessary and does not have to wait for the task forces to complete their work before action is taken.
• There’s significant speculation (see Analyst Views section later in this preview) that Warsh may want a “do-over” of some of his recent communications, most notably at the July FOMC press conference in which he appeared to suggest it’s possible the Fed could switch away from PCE as its preferred inflation-targeting metric (a comment that appeared to help drive bear steepening in the Treasury curve). We will be watching for whether he makes it explicit that PCE is the target, without mentioning it could be changed.
• Additionally we will be watching for whether he refers to the current restrictiveness of policy (he has previously said it’s “somewhat” restrictive in some areas but overall “uneven”, or whether he revisits his July comments on how the shift in real and nominal market yields have done some of the tightening for the Fed (also mentioned in the meeting minutes).