RATINGS: S&P Leaves Italy At BBB+, Keeps Door Open to Upgrade

The NZD/USD had a range overnight of 0.5565 - 0.5625, Asia is currently trading around 0.5597. The pair topped out again above the 0.5600 area, collapsing lower in reaction to the US CPI. A stronger print in both headline and core makes the FOMC a live meeting this month. There has been some decent demand toward the 0.5500 area since 2020 and it would take a strong push below there to see the bears look for another sustained leg lower. While below 0.5700-0.5750 the trend remains lower albeit a little stretched. Initial resistance is 0.5610-0.5640 which held again overnight and above there the 0.5700-0.5750 area comes back into play. Risk is coming under pressure and the broader USD is challenging some important resistance, can this give it the impetus it needs to challenge the 0.5500 area ?                  

• “Traders Weigh Three Hikes by March After Hot CPI. Traders are going where the data points, and hotter-than-expected CPI figures point to a greater likelihood of more rate increases. The outlook for rates over the next few months has shifted toward at least two hikes by March, with more than a 70% probability of a third priced in.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.5565(NZD350m). Upcoming Close Strikes : none - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 37 Points

Fig 1: NZD/USD Spot Monthly Chart

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

"*TRUMP: TERRIBLE FED HAS INTEREST RATES ARTIFICIALLY HIGH" - BBG

The AUD/USD had a range overnight of 0.6951-0.7013, Asia is currently trading around 0.6971. The pair topped out again around the 0.7000 area, collapsing lower in reaction to the US CPI. A stronger print in both headline and core makes the FOMC a live meeting this month. Stocks turned lower on this and the headwinds for risk could finally be having an impact. The AUD actually outperformed overnight but should risk remain under pressure I will be looking to see if the pair can play some catch up. The first resistance on the day is right here 0.6980-0.7010 and then the 0.7050-0.7100 area comes back into play. I am skewed toward fading a bounce looking to see if this wobble in risk can provide the US Dollar the impetus to break higher and in this environment I suspect the AUD would be testing the 0.6800-0.6850 area.   

• MNI - AU Employment, Watch Q3 As Statistical Factors May Increase Monthly Volatility. September jobs data are published Thursday. The data is volatile and so difficult to forecast. Bloomberg consensus expects a 20k rise in employment, a stable unemployment rate at 4.6% while the participation rate could fall 0.1pp to 67% after it jumped in August. The RBA also monitors hours worked and the underemployment & youth unemployment rates.
• Employment projections are between zero and +35k with most overwhelmingly at consensus' +20k, highlighting the difficulty in forecasting this series. NAB & Westpac are in line with this while ANZ and CBA are below expecting 15k and 10k respectively.
• “Goldman and UBS are among global banks that are pulling back from financing Australian private credit funds, people familiar said.” - BBG  
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.6900(AUD657m), 0.7000(AUD1.31b), 0.7020(AUD850m). Upcoming Close Strikes : 0.6950(AUD689m Oct 16), 0.6975(AUD629m Oct 19), 0.7100(AUD574m Oct 16) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 45 Points
• Data/Event: Employment, RBA releases annual report 

Fig 1: AUD/USD spot Daily Chart

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