US CPI rates to move the markets

The USD continued to edge lower against its counterparts yesterday, despite the PPI rates coming in higher than expected at a year-on-year level, implying that inflationary pressures still are persistent, at least at a producer level, in the US economy. On the monetary front, we note that the release of the Fed’s meeting minutes did not produce any conclusive evidence about the Fed’s intentions and had little effect on major pairs. Attention now turns towards the US CPI rates for September and a possible acceleration may intensify market worries for another rate hike by the bank and thus provide some support for the USD.

Across the Atlantic, the pound was little moved by the release of the UK’s GDP rates for August as they accelerated as expected. We note that the rise may provide some confidence to BoE, as the economic outlook for the UK seems to be improving. We note as the next big test for pound traders the speech of BoE’s chief economist Hugh Pill. Any indications of another rate hike by the bank could support the GBP and vice versa. EUR traders on the other hand are expected to keep an eye out for a number of ECB speakers today, yet we would not expect any hawkish surprises, yet we note Mr. Klaas Knot as a possible exception.     

During tomorrow’s Asian session, we highlight the release of China’s trade data for September and should the data imply increased economic activity and a widened surplus we may see CNY getting some support. Aussie traders are expected to turn their attention toward China’s import growth rate and a possible improvement could provide some support for the Aussie as it could imply more exports of Australian raw materials to China. Yet AUD may also be moved by the wider market sentiment as it is considered a riskier asset given its second nature as a commodity currency.

On a technical level, AUD/USD stabilised just above the 0.6400 (S1) support line. As the pairs’ price action has broken the upward trendline guiding it, we switch our bullish outlook for a sideways motion bias for now. Should buyers regain control of AUD/USD’s direction we set as the next possible target the 0.6515 (R1) resistance hurdle. Should a selling interest be expressed by the market for the pair, we may see AUD/USD breaking the 0.6400 (S1) support line and aim for the 0.6285 (S2) support level.   

On the commodities front, we note the wide drop of oil prices yesterday. The drop seems to have been instigated by Saudi Arabia’s pledge that it would help stabilise the oil market. Yet market worries tend to partially remain on the Israeli conflict and any possible repercussions any possible escalation may have on oil prices. In addition to that the wide rise of US oil inventories as reported by API yesterday tended to weaken oil prices further.   

WTI’s price dropped reaching the 81.60 (S1) support line yesterday. Given the drop and that the RSI indicator remains near the reading of 30, implying a bearish sentiment on behalf of the market, we would not be surprised to see black gold’s price dropping further. Should the bears actually take charge of WTI’s price we may see it breaking the 81.60 (S1) line and aim for the 76.00 (S2) support base. Should the bulls take over we may see WTIs’ price rising and breaking the 84.50 (R1) line and aim for the 87.50 (R2) resistance nest.

Other highlights for the day:

Today we note the release of the US weekly initial jobless claims figure while oil traders may be more interested in the release of the weekly EIA crude oil inventories figure. On the monetary front, we note that  ECB Board Member Elderson, ECB policymaker De Galhau, BoE Chief Economist Hugh Pill, ECB policymaker Knot, ECB Board Member Panetta, Atlanta Fed President Bostic, and Boston Fed President Collins are scheduled to speak. During tomorrow’s Asian session, we note the release from New Zealand of September’s manufacturing PMI figure as well as China’s inflation metrics.

AUD/USD 4 Hour Chart

Support: 0.6400 (S1), 0.6285 (S2), 0.6170 (S3)

Resistance: 0.6515 (R1), 0.6620 (R2), 0.6725 (R3)

WTI 4 Hour Chart

Support: 81.60 (S1), 76.00 (S2), 72.30 (S3)

Resistance: 84.50 (R1), 87.50 (R2), 92.15 (R3)

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