AUD: Waiting For The US CPI
AUDUSD is starting the day around 0.628. It fell to 0.6236 overnight as the USD strengthened and then spiked to 0.6299 before the FOMC minutes drove a rally in the USD.
- The overnight low of 0.6236 in AUDUSD is the new initial support level but markets are likely to be fairly stable while they await tonight’s US CPI. The currency is in a bear trend with lower lows and lower highs. The downtrend is expected to continue through 0.6200.
- AUD rallied against the JPY and is now trading at 92.22 up from the intraday low of 91.295, as Japan maintains its easy monetary policy. AUDNZD was fairly stable overnight and is now at 1.119. AUDGBP fell to 0.565 as GBP rallied more broadly.
- Equity markets were slightly lower overnight as risk appetite wanes as growth fears rise. VIX rose a percent but ended the day where it started at 33.6%. Oil prices unwound more of last week’s rally falling around 2% as US crude stocks rose. Copper prices were down a percent and iron ore was around $96.
- In Australia, Melbourne Institute consumer inflation expectations for October are published and risk printing higher on the back of a pick up in petrol prices. The main focus of the day will be September US CPI.
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USDCAD TECHS: Corrective Pullback Still In Play
- RES 4: 1.3368 2.0% 10-dma envelope
- RES 3: 1.3300 High Nov 4 2020
- RES 2: 1.3224 High Jul 14 and key resistance
- RES 1: 1.3105/3209 High Sep 9 / 7
- PRICE: 1.2982 @ 16:08 BST Sep 12
- SUP 1: 1.2963 50-day EMA
- SUP 2: 1.2895 Low Aug 25 and key near-term support
- SUP 3: 1.2828 Low Aug 17
- SUP 4: 1.2770 Low Aug 15
A USDCAD bullish theme remains intact, however, the pair has failed to hold on to last week’s highs and this has resulted in a corrective pullback. Price has traded below the 20-day EMA and attention turns to support at 1.2963, the 50-day EMA. A break of this average would suggest scope for a deeper pullback. A resumption of gains would refocus attention on key resistance at 1.3324, the Jul 14 high and bull trigger.
US TSYS: Tsy Yld Curve Bear Steepening Ahead August CPI
Tsys trading near late session lows after starting off near highs - bonds experienced a wide range (30YY 3.5284% late high vs. 3.4102% low) on light overall volumes (TYZ2 <985k) with no economic data to trade off of - participants close to the sidelines ahead Tuesday's CPI read for August MoM (0.00% prior, -0.10% est); YoY (8.5% prior, 8.0% est).
- Rush of Treasury issuance Mon-Tue due to Thu settle, maintains 2 day gap between last auction and settle generated some midday interest:
- Treasury futures pare gains slightly after $41B 3Y note auction (91282CFK2) tail: 3.564% high yield vs. 3.545% WI; 2.49x bid-to-cover vs. 2.50x last month.
- Futures sale accelerated after $32B 10Y note auction re-open (91282CFF3) underperformed: large tail w/ 3.330% high yield vs. 3.302% WI; 2.37x bid-to-cover vs. last month's 2.53x.
- Despite a late Block sale of 7,531 FVZ2 at 110-03.75, yield curves extended steepener move w/ 2s10s tapping -20.167 high.
- Note on short end Eurodollar futures expiration: The CME Group has confirmed the final settlement price for Sep'22 Eurodollar (EDU2) futures (and 3M Sep options expiration) will be based on the 3M USD Libor fix published this Friday, Sep 16 due to UK bank closure for the Queen's funeral next Monday Sep 19.
- Currently, the 2-Yr yield is up 0.9bps at 3.5652%, 5-Yr is up 1.9bps at 3.4545%, 10-Yr is up 4.6bps at 3.3558%, and 30-Yr is up 5.6bps at 3.503%.
US OUTLOOK/OPINION: GS Look For CPI Strength In Services Bar Airfares
- Goldman are in line with consensus as they see core CPI 0.32% M/M in August, pushing up from 5.9% to 6.06% Y/Y. Lower gasoline prices should push headline to -0.13% M/M for -0.5pps to 8.02% Y/Y..
- They see core weakness being led by a further drop in airfares on back of lower oil as well as net softness in autos due to easing supply chain constraints and 2023 model year arrivals.
- However, they see continued strength in services due to wage pressures, labor shortages and elevated short-term inflation expectations, especially shelter (rent +0.65%, OER +0.55%), plus 0.6% for education and another gain in car insurance as carriers push try to offset higher repair and replacement costs.
