FED Chairman Powell will be speaking tonight in a panel discussion at 11PM (GMT+8). Three things can happen.
1. Nothing will happen – market being immuned to what the FED chairman’s tone for the past week might not react to anything he’ll say.
2. He can say how bad the state of the economy will be without stressing the support of the FED through stimulus packages. This could just provide a breather to the market’s ascent. USD and JPY might gain out of this.
3. He steps on the risk accelerator pedal by stressing the unlimited support of the FED. This could drive the market to break recent resistance levels and push the markets higher. Risky currencies AUD and NZD will move up as well as Gold.
Among the 3 different scenarios, #2 would be the ideal outcome because this will give opportunity to go long in the market. The market is overall risk-on scenario because of the stimulus packages. A little bit of fear can cause dips for the bulls to get in. I’d go long AUD or NZD.
If market breaks out further (scenario #3), shorting AUD or NZD may be very risky. Perhaps a more neutral currency like EUR or GBP might just be a good compromise.