Jay Powell will speak at 10:05 AM EST today in a speech that is widely regarded as more important than previous addresses this year. Will he point to a pause to see “restrictive rates work for a while” as Fed member Harker addressed yesterday? Will he come out with a hawkish message that not enough has been done? Will he split the middle and have the message be “data dependent” as he has so many times this year? The trading world will find out this morning.

The reason this message is regard as more important than previous addresses is where yields and the dollar are on their respective charts. With yields near 15-year highs and the dollar on a rampage lately, a hawkish message similar to last year could drive both higher and as a result cause a little havoc in markets. A dovish message could have the opposite effect and provide immediate relief to bonds, likely send precious metals higher and equites could see a boost.

Pay attention to the dollar and 10-year yields (TNX) today and in the coming days for pattern development. Remember, Fed events are not one day events and certainly not one-hour events. The dollar and yields will tell you the markets real reaction over the next few trading sessions to Powell’s speech this morning. Act accordingly.

Chart of the Day: UUP

The dollar has been in strong rally mode lately along with yields. This has put a lot of pressure on bonds, precious metals, and equities. Watch these charts in the coming days post Jackson Hole to get a sense of the market’s interpretation of Powell’s speech.

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