PLN: Zloty Consolidates In "Optimal" Range, Flash Sep CPI Eyed This Week
EUR/PLN has trimmed its earlier losses, with price action supported by the 20-EMA for the second consecutive day. The rate last deals -60 pips at 4.5983, while the key exponential moving average kicks in at 4.5847. A break below that EMA would allow bears to target the 50-EMA at 4.5343. It is worth noting that the pair is consolidating within the 4.40-4.60 range, which government officials said would be "optimal".
- Poland's statistics bureau will publish flash September CPI data this Friday. Consensus looks for a deceleration in headline inflation to +8.5% Y/Y. Earlier this month, the NBP defied its own guidance and cut rates by 75bp with inflation still in double digits. Furthermore, this month's data will reflect the impact of pre-election measures taken by the government and state-owned fuel retailer to lower consumer prices. As a result, the reading will be of less importance than last month, but it will still be watched by the market as one of the inputs into the NBP's decision-making process.
- POLGB curve remains slightly steeper on the day. The Finance Ministry said that it will offer PLN5-8bn of OK1025, WZ1128, WS0429 and DS1033 bonds at an auction on Wednesday, while refraining from sales of WIRON-based notes, despite flagging potential for such a move. It also announced a plan to issue 1-year notes with an initial coupon of 6.50% and 2-year notes with a coupon of 6.75% next month (down from 6.75% and 6.85% previously) in order to "ensure that bond buyers have attractive investment opportunities". Yields on new notes will be higher than expected, given that the NBP reduced its policy rate by 75bp.
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USDCAD TECHS: Trading At The Week’s Highs
- RES 4: 1.3805 High Mar 24
- RES 3: 1.3732 Trendline resistance drawn from the Oct 13 2022 high
- RES 2: 1.3655 High May 26 and a key resistance
- RES 1: 1.3640 High Aug 25
- PRICE: 1.3628 @ 16:51 BST Aug 25
- SUP 1: 1.3496 Low Aug 21
- SUP 2: 1.3451 20-day EMA
- SUP 3: 1.3381 50-day EMA
- SUP 4: 1.3266 Low Aug 2
USDCAD is trading at this week’s highs. The fresh cycle high on Wednesday reinforces the uptrend and maintains the price sequence of higher highs and higher lows. A clear break of 1.3600 would expose 1.3655, May 26 high. Note that a trendline resistance, drawn from the Oct 13 2022 high, is at 1.3732 and represents an objective further out. Support to watch is 1.3451, the 20-day EMA.
US TSYS: Tsys Off Lows, Chair Powell Tone Balanced At Jackson Hole
- US rates are holding mildly weaker after the bell, near the middle of the session range after early event driven volatility. Treasury futures initially trade weaker/extend lows in reaction to Fed Chairman Powell's keynote speech from Jackson Hole economic summit, and just as quickly reversed course.
- Stocks are trading firmer in late trade, headed back near early session highs as Fed Chairman Powell's speech from Jackson Hole deemed more balanced, or at the least: not as hawkish as it could have been.
- “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” Powell said in his widely awaited Jackson Hole speech. “There is substantial further ground to cover to get back to price stability.”
- Powell said he’s pleased to see inflation coming down but is not yet fully convinced that price pressures are on a sustainable path downward to the Fed’s 2% target, particularly because inflation excluding food and energy prices remains more than twice that level.
- Front month 10Y futures marked 109-03.5 low (-15.5) are currently trading 109-13.5 after tapping 109-23 briefly this morning. Heavy futures volume by the close (TYU3>3.6M) due to a surge in quarterly futures rolls from Sep to Dec ahead next Thursday's First Notice. Sep'23 Treasury options expiration also added to heavy volumes.
- Slow start to the week ahead -- culminates with the latest employment data for August next Friday.
AUDUSD TECHS: Bears Remain In The Driver’s Seat
- RES 4: 0.6723 High Aug 1
- RES 3: 0.6597 50-day EMA
- RES 2: 0.6509 20-day EMA
- RES 1: 0.6488 High Aug 24
- PRICE: 0.6406 @ 16:50 BST Aug 25
- SUP 1: 0.6365 Low Aug 17 and the bear trigger
- SUP 2: 0.6285 Low Nov 4 2022
- SUP 3: 0.6272 Low Nov 3 2022 and a key support
- SUP 4: 0.6215 2.236 proj of the Jun 16 - Jun 29 - Jul 13 price swing
The AUDUSD trend remains bearish and the latest recovery appears to be a correction - Thursday’s sell-off reinforces this theme. Firm resistance is at the 20-day EMA at 0.6509. The 50-day EMA is at 0.6597. The pair has recently breached support at 0.6458, May 31 low and a bear trigger. This strengthens the downtrend and opens 0.6285 next, the Nov 4 2022 low. On the upside, clearance of the 20-day EMA would suggest scope for a stronger correction.
