GOLD: Bullion Slightly Lower Ahead Of US CPI Release

In the equity space, the major indices are mostly in the green at this stage. Japan benchmarks are the standout, while gains are more modest elsewhere. US Equity futures are a touch higher, after modest cash losses in Monday US trade. The focus is on the US CPI print later. A decent upside surprise is likely needed to derail a Fed cut in September. 

• For Japan markets, the Topix is up a further +1.7%, while the NKY 225 is around +2.7%, trading at fresh record highs. Cited catalysts have been tariff related relief (that Japan avoided a worse case scenario), while better earnings in the tech space are another positive. The Topix information and communication sub index is up around 2.7% at this stage. Markets were also out yesterday, so some catch up may be in play.
• In China and Hong Kong markets are higher, although more so for China. The CSI 300 is up around 0.6%, while the HSI is just in positive territory. There has been some drag from the HSI tech sub index.
• The Taiex is up a touch, while the South Korean Kospi is close to flat. The Kospi was up in early trade, but the South Korean Presidential Office denied earlier onshore media reports around a potentially favorably stock capital gains tax ruling.
• In South East Asia, Indonesian stocks are up strongly, last +1.3%. Thailand and Singapore are down modestly.
• In Australia, the ASX 200 is close to flat as markets await the RBA decision in a few minutes. The central bank is widely expected to cut rates by 25 bps. 

The BBDXY has had a range of 1206.70 - 1207.69 in the Asia-Pac session, it is currently trading around 1207, -0.10%. The USD bounced in the N/Y Session as some shorts pared back their exposure as we look toward the US CPI tonight. A sustained break back below 1198 points to a retest of the lows, and a bounce back towards 1220/1230 should probably be faded initially. Where the CPI comes in tonight will determine which level gets tested.

• EUR/USD -  Asian range 1.1610 - 1.1625, Asia is currently trading 1.1620. The pair has bounced nicely off the important 1.1300/1.1400 area. The market has stalled at its first attempt to challenge the resistance around the 1.1700 area. Having moved away from 1.1700 the US CPI tonight will determine if we have another go at it.
• GBP/USD - Asian range 1.3426 - 1.3440, Asia is currently dealing around 1.3430. The pair bounced nicely off the 1.3100/1.3200 support area. Sellers saw the move higher stall just above 1.3450 and the US CPI will have a say in if that is now the top in the short-term.
• USD/CNH - Asian range 7.1895 - 7.1965, the USD/CNY fix printed 7.1418, Asia is currently dealing around 7.1930. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX +0.07%, Gold $3352, US 10-Year 4.283%, BBDXY 1207, Crude Oil $64.18
• Data/Events : EZ Zew Survey, Germany Zew Survey/Current Account Balance

Fig 1: GBP/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The Asia-Pac USD/JPY range has been 148.05 - 148.45, Asia is currently trading around 148.45, +0.19%. USD/JPY is probing above 148.00 as the market pares back on some USD’s shorts going into the US CPI tonight. Price is holding above the support area between 146.00/147.00, a move sub 145.00 is needed to turn momentum lower once more, until then the 145.00-151-00 range should dominate. US CPI tonight will determine which end of the range is tested.

• MNI US CPI Preview: High Early Bar To September Fed Hold. The CPI report for July is released on Tuesday Aug 12, at 0830ET. Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June and unrounded analyst estimates broadly echo this with a median 0.32% M/M. It would mark a further acceleration from 0.23% M/M in June and 0.13% M/M in May for its fastest pace since January, with the latest firming seen coming from core goods inflation doubling to 0.4% M/M. 
• (Bloomberg) -- Bond investors betting on a Federal Reserve interest rate cut next month face a potential roadblock: inflation. July’s consumer price index, due on Tuesday, will give traders clues on how President Donald Trump’s tariffs are affecting costs. Economists surveyed by Bloomberg expect the annual core inflation rate to rise to 3%, the highest since February.
• Options : Close significant option expiries for NY cut, based on DTCC data: 147.30($878m), 146.00($597m).Upcoming Close Strikes : 147.00($1.01b Aug 13), 150.25($1.47b Aug 13) - BBG.
• CFTC data shows asset managers reduced their JPY longs +60532( Last +75119), leveraged funds slightly reduced their newly built short JPY position -29308(Last -31280).

Fig 1 : USD/JPY Spot H2 Chart

Source: MNI - Market News/Bloomberg Finance L.P