In a world where forex is a tool for central bankers, if the USD goes up further – like it did overnight – then the rest of the world is happier and if it goes down, trouble, writes Bob Savage, CEO of Track Research in his Tuesday commentary from London.

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Much ado about nothing. Calling today a turn-around Tuesday may be too extreme as mood swings about risk-on or off in the midst of light economic data and little harder geopolitical news leaves price action stuck more in a range.

Wake me up when the euro (EUR/USD) breaks 1.16 or 1.19. Connecting price action to fundamentals hasn’t been so fruitful of late – blame the noise of summer. The focus overnight was on US Treasury Mnuchin sounding upbeat on raising the debt ceiling and getting tax reform.

Trump promised to stay the course in the 16-year Afghanistan war – likely adding troops in the process.

USD is higher overnight as most analysts see Jackson Hole as the key risk.

Japanese yen (JPY/USD), Gold both lower while Oil and Iron Ore higher.

In Asia, North Korea threats are losing their sting while the Bank of Thailand is back to battling Thai baht (USD/THB) strength – warning on capital controls.

Indonesia is thinking about cutting rates to spur growth and the Japanese are continuing to play with BOJ debt monetization. We remain in a world where forex is a tool for central bankers – just ask the ECB. That puts the Jackson Hole focus into perspective and makes the day that much simpler – if the USD goes up further – like it did overnight – then the rest of the world is happier and if it goes down, trouble.

The EUR is an example of this today – as the drop in the currency back to Monday’s lows is more indicative of noise than of anything new from the ECB or the data – as the ZEW Indicator of Economic Sentiment isn’t as powerful at the IFO in predicting growth. The chart for the EUR is telling us that the failures over 1.18 make a test of 1.16 more likely and more dangerous.

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