Daily Market Outlook, September 14th, 2021

Overnight Headlines

  • Australia's RBA Optimistic On Recovery, Still Committed To Low Rates
  • Australia Business Conditions Show Promising Improvement In August
  • Australia Real House Prices Rise Most In More Than 17 Years
  • New Zealand Real House Prices Rise For 32nd Straight Month
  • Shiba Won't Join Race To Succeed Suga As Premier - Yomiuri
  • EU Pushes For Deeper Indo-Pacific Ties In Face Of China Concerns
  • U.S. Consumers' Inflation Expectations Highest Since 2013 - NY Fed
  • US Pres Biden Invites Leaders To WH For Quad Summit Next Week
  • Norway's PM Solberg Concedes Defeat In Parliamentary Elections
  • Dollar Holds Tight Range As Investors Await U.S. Inflation Data
  • Libor Replacement Reaches Wall Street’s Leveraged Loan Market
  • Oil Extends Gains On Worries Of U.S. Disruptions From Another Storm
  • Gold Holds Gain Ahead Of U.S. CPI With Taper Timeline In Focus
  • Energy Prices Rocket To New High Amid Global Gas Crunch
  • APAC Shares Mixed; Evergrande Tumbles Following Property Sales Warning
  • Nikkei225 Set For Highest Close Since 1990 As Japan Stocks Rise
  • Oracle Misses Quarterly Revenue Estimates Amid Strong Competition

The Day Ahead

  • US CPI inflation data are likely to be the key focus of attention for markets for the rest of the day. Higher commodity prices and supply chain disruptions, combined with recovering demand, have helped to push up global inflation rates this year. The US has seen by far the biggest rise so far, led by energy prices and used car prices (due to a shortage of new stock). There are tentative signs that price pressures in some Covid-affected categories may have peaked. However, cost pressures related to supply bottlenecks overall remain elevated and the latest producer price data again showed a larger than expected rise. Expect annual August US CPI gains to hold at 5.4% and core inflation at 4.3% signalling that inflation remains well above the Federal Reserve’s 2% target. A majority of Fed policymakers have previously signalled that they expect this year’s rise to be temporary and today’s outturn is unlikely to change their minds. Nevertheless, it is something that they will have to bear in mind ahead of next week's US monetary policy update as they consider when they should start cutting back their current asset purchase programme.
  • August inflation data are also due in the UK early Wednesday. Annual CPI inflation fell to 2.0% in July but that was probably only a temporary respite. Look for a return to the upward trend in August with headline inflation moving sharply higher to 3.0%, due to a range of factors. The rise would keep inflation on track to meet the Bank of England’s forecast for 4% by the end of the year. It will certainly be something that BoE policy makers will want to discuss during next week's monetary policy assessment although many of them have also previously said that they expect rises to be temporary. There have been indications that the spread of the delta variant and measures to tackle it may be affecting economic activity in China. With other data slow ing, August retail sales and industrial production data due early Wednesday will be watched for further signs of slow down.

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

  • USDJPY - 110.20/40 489m. 108.00 450m.
  • EURUSD - 1.1950 479m. 1.1920 859m. 1.1900 593m. 1.1820/30 1.43bn (1.17bn C). 1.1740/50 1.72bn (1.34bn P).
  • AUDUSD - 0.7400 582m. 0.7360/70 611m. 0.7340 1.00bn (634m P). 0.7300 668m.
  • USDCAD - 1.2650 1.01bn (661m C). 1.2600/10 1.07bn (641m C).
  • AUDJPY - 82.60 1.12bn (1.09bn P). 82.00 977m. 80.50 1.99bn (P). 79.50 816m.
  • USDCNH - 6.55 640m. 6.50 632m. 6.49 1.37bn (782m P).

Technical & Trade Views

EURUSD Bias: Bearish below 1.19 Bullish above

  • Edges higher as market goes quiet ahead of US CPI
  • EUR/USD opened flat at 1.1811 after recovering from 1.1770 during US session
  • It dipped to 1.1806 early Asia before drifting back to 1.1819
  • Heading into the afternoon it is trading around 1.1815
  • Market in Asia is quiet ahead of US CPI later today
  • A hotter than expected US CPI may have a hawkish impact on Fed expectations
  • EUR/USD support is at the 61.8 of 1.1664/1.1909 move at 1.1757
  • Resistance is at the 10-day MA at 1.1838 with sellers tipped around 1.1850

GBPUSD Bias: Bearish below 1.39 Bullish above.

  • Plenty of event risk – poised below resilient 1.3900
  • Touch firmer in a tight 1.3836-1.3850 range with only modest interest
  • Plenty of UK and U.S. event risk with the potential to drive volatility
  • UK jobs - polls - Employment change +178k, and Unemployment rate 4.6%
  • U.S. CPI pivotal for UST yields and USD - polls +0.4% M/M and core M/M +0.3
  • Charts; momentum studies climb, 5, 10 & 21 DMAs conflict - neutral setup
  • Major 1.3900 resistance, 1.3890 Sep double top, 1.3897 upper 21 day Bolli
  • Close above 1.3900 would open the door to a test of 1.3983 July trend high
  • Monday's 1.3797 London low then 1.3769 21 DMA are initial supports

USDJPY Bias: Bullish above 109 Bearish below

  • USD/JPY both sides of 110.00, crosses buoyant, trade quiet
  • USD/JPY better bid in Asia, 109.97 pre-Tokyo fix to 110.11 EBS
  • Essentially in tight range around 110.00, well within recent ranges
  • Ensconced in 109.76-110.19 daily Ichi cloud, 100-DMA 109.84, 55-DMA 110.05
  • US yields sideways in Asia, Treasury 10s @1.337% ahead of US CPI release
  • Nikkei to levels not seen since 1990, +0.4% @30,562, E-Minis +0.1% @4465
  • JPY crosses steady to better bid, even EUR after hawkish Schnabel talk
  • EUR/JPY up marginally, 129.86 to 130.06 EBS, Schnabel

AUDUSD Bias: Bearish below 0.75 Bullish above

  • Moves lower after RBA Lowe's speech
  • AUD/USD has eased to 0.7355 from 0.7370 after a speech by RBA Governor Lowe
  • RBA Governor reiterated cash rate unlikely to rise before 2024
  • Lowe said it was "difficult to understand why markets pricing in hikes for 2022/2023"
  • Comments were cautious - noting Delta outbreak added an element of uncertainty
  • RBA expects economy to start recovering in Q4 and 2022 - but new variants were a risk
  • AUD/USD support is at the 38.2 of the 0.7106/0.7477 move at 0.7335