Japan’s CPI rates in sight

The Japanese inflation print is set to be released during tomorrow’s trading session.

MORNING OVERVIEW

We’re looking forward to the release of Japan’s CPI rates for September during tomorrow’s Asian session. The CPI print is expected to showcase an acceleration of inflationary pressures in the Japanese economy, which in turn could increase pressure on the BOJ to maintain its restrictive monetary policy path. Thus, the financial release tomorrow could aid the JPY.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — Japanese CPI rates due tomorrow

Japan’s CPI rates for September are due to be released tomorrow. The current expectations of economists are that core inflation on a year-on-year level is set to accelerate from 1.7% to 2.1%, which could spark worries about the persistent increase of inflation within the economy. In turn, such a scenario may increase pressure for back-to-back rate hikes from the BOJ, which in turn may provide support for the JPY.

Market implication (JPY): Bullish

02 — Russia agrees to peace talks with Ukraine and the US

According to a report by Reuters, Russian President Putin has agreed to resume US hosted peace talks with Ukraine. The possible resumption of peace talks between Russia and Ukraine could weigh on oil prices, yet if we’re being honest we have found ourselves at this crossroads before, with little progress being made if any in regards to bringing the war in Ukraine to an end. Therefore, some bearish tendencies could be exerted on oil prices but we wouldn’t be surprised if the market ignores the announcement.

Market implication (OIL): Bearish

03 — Government websites taken down as AI discovers  PHP vulnerabilities

Governments and companies are rushing to patch a PHP vulnerability which was discovered recently. According to a report by Reuters “Amazon said it had identified an attempt by hackers to exploit the bug four days before the weakness was disclosed to the public and that the flows were now being exploited in the wild”. In turn, any company which appear to have been affected by the exploit could see downwards pressures on their stock price.

Market implication (N/A) : N/A

WHAT MATTERS TOMORROW

Japan’s Nationwide Core CPI rate

Time GMT+2): 02:30

Expected: 2.1%
Previous: 1.7%

Potential market reaction:
Could support JPY

ASSET FOCUS

[GOLD , Commodities]

Gold appears to be moving in a downwards fashion, with the precious metal’s price currently testing our 4080 (S1) support level. We opt for a bearish outlook for the commodity’s price and supporting our case is the RSI indicator below our chart which tends to imply a bearish market sentiment. For our bearish outlook to be maintained, we would require a break below our 4080 (S1) support level, with the next possible target for the bears being our 3945 (S2) support line. On the other hand, for a sideways bias we would require gold’s price to remain confined between our 4080 (S1) support level and our 4200 (R1) resistance line. Lastly, for a bullish outlook, we would require a clear break above our 4200 (R1) resistance level, with the next possible target for the bulls being our 4350 (R2) resistance line.

KEY LEVELS

• Resistance (R1): 4200
• Resistance (R2): 4350
• Support (S1): 4080
• Support (S2): 3945

Technical View: Bearish

CROSS-ASSET VIEW

TRADING SPHERE VIEW

Bearish for EUR

Our base case:
We wouldn’t be surprised to see political instability in France continuing, as the situation continues to develop following the riots in France over the weekend. Moreover, France’s borrowing debt has continued to grow, which could spell trouble for one of Europe’s largest economies

What would change our view:
A budget proposal being passed.

RISKS TO THE VIEW

Contagion effect resulting in France’s fiscal ambitions being pushed back

France is currently facing a variety of issues, including concerns over its economy, which may weigh on the EUR in the future.

TOMORROW’S WATCHLIST

01 Japan’s Nationwide CPI rates

DISCLAIMER: This content is for general informational and educational purposes only and should not be considered investment advice or investment recommendation