STIR: Quarterly Rate Cadence Intact Heading Into Inflation Week

• RES 4: 1.4175 High Jul 13
• RES 3: 1.4129 High Jul 28  
• RES 2: 1.4080 High Aug 4 and 5 
• RES 1: 1.3925 50-day EMA  
• PRICE: 1.3808 @ 17:19 BST Sep 09
• SUP 1: 1.3732 Low Aug 21 and the bear trigger
• SUP 2: 1.3715 76.4% retracement of the May 1 - Jun 24 bull cycle
• SUP 3: 1.3672 Low May 12
• SUP 4: 1.3620 Low May 7

The trend set-up in USDCAD is unchanged, it remains bearish and the reversal on Sep 2 reinforces a bear theme. A key near-term resistance at the 50-day EMA, at 1.3925, is intact. A clear break of this average is required to strengthen any short-term bull theme and this would signal scope for a stronger retracement of the Jun 24 - Aug 21 bear leg. For bears, attention is on key near-term support at 1.3732, the Aug 21 low.  

• Treasuries look to finish weaker after extending cycle lows Wednesday. Higher crude weighed on sentiment (WTI appr $96.5/bbl) after US confirmed it destroyed five Iranian crude oil carriers, after Iran's IRGC targeted an American Navy warship with ballistic missiles.
• While Middle East tensions remain an ongoing theme - rates gapped lower after $6bln buy-back announced by Treasury (up from $2bln at the August refunding and above the $4bln minimum set out last month) was broadly in the range of some expectations we had seen, but still hasn’t been enough to appease markets amid continued pressure in global rates markets.
• TYZ6 fell to 106-31.5 low post-buy back announcement, yield climbed to 4.8528% high (Oct 2023 lvl). This leaves 106-26 as the next key downside level, marking the 1.236 projection of the Jun 30 - Jul 14 - 17 price swing. Resistance at the 20-day EMA is at 107-30.
• Nearer-term Fed Funds futures see 15.5bp of hikes priced for next week’s FOMC decision before a cumulative 23bp for October, 37bp by year-end, a second 25bp hike fully priced for Mar 2027 and a cumulative 63bp of hikes for Jun 2027.
• Looking to Friday’s CPI report in particular, we see a median unrounded analyst estimate looking for 0.22% M/M for unchanged from the 0.22% in July (in a range of 0.18-0.25). Early core PCE tracking currently sits at 0.21% M/M after 0.25% in July but with updates likely due with tomorrow’s PPI report.
• In a crucial release ahead of next week’s Fed decision, MNI’s unrounded median of analyst estimates for August’s CPI report out Friday sees 0.22% M/M for core and 0.39% for headline. Mixed drivers are expected for core CPI components, with travel-related items sequentially stronger than in July but weakness across a variety of other areas. Lodging is seen rising slightly after two notably weaker-than-expected months, and airfares are seen increasing strongly.

• RES 4: 0.7328 2.0% 10-dma envelope 
• RES 3: 0.7310 1.00 proj of the Mar 30 - May 6 - Jun 30 price swing
• RES 2: 0.7278 High May 6 and key resistance
• RES 1: 0.7238 High Sep 09
• PRICE: 0.7215 @ 17:18 BST Sep 09
• SUP 1: 0.7151 20-day EMA 
• SUP 2: 0.7094 50-day EMA  
• SUP 3: 0.7023 Low Aug 6 and 7 
• SUP 4: 0.6922 Low Jul 29  

AUDUSD continues to appreciate, delivering another cycle high today. The extension reinforces current bullish trend conditions and maintains the price sequence of higher highs and higher lows. A continuation of the bull leg would pave the way for a climb towards 0.7278, the May 6 high and a key resistance. Key support to watch is the 50-day EMA at 0.7094. First support lies at the 20-day EMA, at 0.7151.