US Inflation data due out today

The main event of the day is the release of the US CPI rates which will provide insight into the state of inflation within the US economy.

MORNING OVERVIEW

Attention is shifting to the dollar today, as we mentioned above. The US CPI rates will be a key test for market participants, especially considering that they are anticipated to accelerate.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — US CPI rates due out today

The US CPI rates are set to be released later on today, with economists anticipating an acceleration of inflationary pressures in the US economy, both on a headline and core level on a year-on-year basis. In particular, the headline CPI rate is set to accelerate from 3.4% to 3.6% whilst the core level is set to accelerate from 2.4% to 2.5%, which could increase pressure on the Fed to maintain or even take measures to further restrict the financial conditions surrounding the US economy. In turn, such implications could provide support for the greenback, whereas should the inflation point disappoint market participants, it may have the opposite effect.

Market implication (USD): Bullish

02 — Australia’s employment data due out tomorrow

In the FX market, we’re keeping a close eye on the Aussie. In tomorrow’s Asian session, Australia releases its September employment data, with the employment change figure expected to decline and the unemployment rate forecast to hold steady. If the data points to a looser labour market than anticipated, the Aussie could come under pressure, while a tighter-than-expected reading could lend support to AUD.

Market implication (AUD): Neutral

03 — Big Bank earnings continue

US big-bank earnings season continues today, with Bank of America, Morgan Stanley and BlackRock all reporting before the market opens. Better-than-expected EPS and revenue, backed by a solid forward outlook, could support their share prices and lift broader market sentiment. On another level, we should note that Reuters reported that Bank of America was fined $1.2 billion by the US government for failing to police suspicious activity which in turn could weigh on the bank’s stock price.

Market implication (N/A) : N/A

WHAT MATTERS TODAY

US CPI rate YoY  for September

Time GMT+2): 15:30

Expected: 3.6%
Previous: 3.4%

Potential market reaction:
Could support USD

ASSET FOCUS

[Gold / Commodities]

XAU/USD appears to be moving in a sideways fashion. We opt for a sideways bias for the bullion. For our sideways to be maintained, we would require gold’s price to remain confined between our 4080 (S1) support level and our 4200 (R1) resistance line. On the other hand, for a bearish outlook 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. Lastly, for a bullish outlook, we would require a clear break above our 4200 (R1) resistance line, with the next possible target for the bulls being our 4350 (R2) resistance level. Lastly, 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.

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 the EUR

Our base case:
Continued political uncertainty in France as the protests continue, whilst the IMF raises growth forecast concerns could weigh on the EUR.

What would change our view:
Measures being taken by the French Government to reduce debt or increase economic growth.

RISKS TO THE VIEW

Snap elections being called

Snap elections being called in France and Germany.

TODAY’S WATCHLIST

01 US CPI rates

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