Novosti i prognoe: devizno tržište od 11-09-2022

• USD/CHF has faced barricades around 0.9600 amid a risk-on market tone.
• Lower consensus for the US CPI is impacting the mighty DXY.
• The Swiss Franc’s lower jobless rate has weakened the USD/CHF pair.

The USD/CHF pair is facing less-confident hurdles around 0.9600 in the early Tokyo session. The asset moved higher after a tepid opening around 0.9580 but is facing exhaustion signals amid a risk-on market mood. A failure to sustain above 0.9600 will drag the greenback bulls towards the previous week’s low of around 0.9560.

A lower consensus for the US Consumer Price Index (CPI) is impacting the mighty US dollar index (DXY). As per the market forecasts, US inflation is seen lower at 8.1% vs. 8.5% recorded for July on an annual basis. A decent drop in headline CPI led by falling gasoline prices and soaring interest rates by the Federal Reserve (Fed) is sufficient to activate bears in the DXY counter.

Investors should be aware of the fact that declining oil infused-inflation will not trim the odds of a third consecutive 75 basis point (bps) rate hike by the Fed. Price pressures are still beyond the desired rate of 2% and it will take a hell of sweat to fix the inflation monster. The core CPI that excludes oil and food prices will improve by 10 basis points (bps) to 6%.

Fed Governor Christopher Waller said on Friday that it was too soon to say whether inflation was moving meaningfully and persistently downward, as reported by Reuters. Fed policymaker added further that the tight labor market has faded signs of recession ahead and the extent of the rate hike will be more data-driven.

On the Swiss franc front, it is worth noting that the decline in the USD/CHF pair is significantly higher than the decline in the mighty US dollar index (DXY) in a broader context. This indicates that the Swiss franc bulls have strengthened extremely after a decline in Swiss Unemployment Rate data. Last week, the Swiss jobless rate landed at 2.1%, against 2.2% as expected on a monthly basis.

• AUD/JPY is marching towards 98.00 on higher consensus for Australian employment data.
• Australian Employment Change is seen extremely higher at 50k against job layouts of 40.9k.
• RBA’s fourth rate hike by 50 bps poured fresh blood into the aussie bulls.

The AUD/JPY pair has displayed a powerful rebound after a gap down opening around 97.00 on Monday. The asset is advancing firmly towards the immediate hurdle of 98.00 amid an overall bullish bias towards the risk barometer. Broadly, a break above 94.80-96.10 has already strengthened the aussie bulls.

The antipodean witnessed buying interest from the market participants after the announcement of an interest rate hike by the Reserve Bank of Australia (RBA).  RBA Governor Philip Lowe went hawkish and announced a hike by 50 basis points (bps) consecutively for the fourth time to address its foremost priority of scaling down price pressures. Currently, RBA’s Official Cash Rate (OCR) stands at 2.35%.  

The central bank has set a target for interest rate elevation and has forecasted the area where inflationary pressures will find their peak. The RBA is looking to escalate its OCR further to 3.85%. Also, the inflation rate will top around 7%. It is worth noting that the inflation rate for the second quarter of CY2022 has been recorded at 6.1%.

Going forward, the Australian employment data will hog the limelight. As per the consensus, the Unemployment Rate is expected to remain stable at 3.4%. The show stopper data will be Employment Change, which is seen extremely higher at 50k against job cuts of 40.9k.  

On the Tokyo front, the upbeat Gross Domestic Product (GDP) data failed to bring meaningful strength to the yen bulls. The Japanese GDP data landed at 0.9%, higher than the forecasts of 0.7% and the prior release of 0.5%. Also, the annual data improved meaningfully to 3.5% against the expectations and the prior print of 2.9% and 2.2% respectively.

Oil demand in China, the world's biggest energy consumer, could contract for the first time in two decades this year as Beijing's zero-COVID policy keeps people at home during upcoming holidays and reduces fuel consumption, reported Reuters.

Key quotes

Market reaction

Despite the price-negative news, oil prices grind higher past $86.00, up 0.40% intraday by the press time.

Also read: US Treasury Secretary Yellen: Fed is going to need skill and luck

• USD/CAD holds lower ground after witnessing the first weekly loss in four.
• Oil prices remain firmer amid geopolitical fears, softer US dollar.
• Hopes of easing inflation join stimulus from major economies to favor cautious optimism.
• After BOC rate hike, US CPI will be in focus for clear directions.

USD/CAD remains on the back foot as bears flirts with the 1.3025-30 levels during Monday’s Asian session. In doing so, the Loonie pair prints a four-day downtrend after snapping the three-week bull-run in the last.

The quote’s run-up could be linked to the firmer prices of Canada’s key export item, WTI crude oil, as well as the broad US dollar weakness amid the market’s hopes of witnessing easy inflation moving forward. Also keeping the bears hopeful is the Bank of Canada’s (BOC) readiness for more rate hikes, despite increasing the benchmark rates by 75 basis points (bps) during the last week.

WTI crude oil remains firmer for the third consecutive day around $86.15, after bouncing off the lowest levels since late January, amid geopolitical fears emanating from the Russia-Ukraine tension and the US-China tussles. The recent Western efforts to cap Russian oil prices and the US-Taiwan ties are the main catalysts, not to for Moscow’s retreat from some of the Ukrainian areas, in these matters.

On the other hand, the US Dollar Index (DXY) reversed from the 20-year high and allowed USD/CAD sellers to remain hopesful, despite hawkish Fedspeak.

Among them, Federal Reserve Governor Christopher Waller was the prominent one as he said on Friday that he supports another significant hike in two weeks. On the same line was Kansas City Fed President Esther George who said, as reported by Reuters, “Case for continuing to remove policy accommodation is clear cut.” Furthermore, Cleveland Federal Reserve Bank President Loretta Mester said, “One inflation report is insufficient to alter one's outlook.” The policymaker also stated that he sees policy rates rising slightly above 4% by early 2023.

Elsewhere, US Treasury Secretary Janet Yellen mentioned that, during the CNN interview on Sunday, “Fed is going to need skill and luck to bring inflation down while maintaining labor market strength.” The policymaker also mentioned that US consumers could experience a spike in gas prices in winter when the European Union significantly cuts back on buying Russian oil.

Market players seem to have gained confidence that the global central bankers will be able to tame the price pressure. In doing so, they manage to accept the hawkish comments/actions of the European Central Bank (ECB) and the US Federal Reserve (Fed).

Technical analysis

A clear downside break of the 21-DMA and the one-month-old ascending trend line, respectively around 1.3040 and 1.3100, keeps USD/CAD bears hopeful of breaking the 1.3000 threshold.

“Fed is going to need skill and luck to bring inflation down while maintaining labor market strength,” said US Treasury Secretary Janet Yellen on Sunday during a CNN interview, reported Reuters.

Key quotes

Market implications

The news failed to witness any major marker reaction during the initial Monday morning in Asia. That said, the softer US dollar, however, helped the prices of gold whereas oil defends the latest rebound from the early 2022 lows.

• NZD/USD has stepped above 0.6100 despite a weaken open ahead of US CPI data.
• A mixed performance is expected from the kiwi GDP data this week.
• The DXY will remain on the tenterhooks ahead of the US Inflation data.

The NZD/USD pair is advancing sharply after a shaky open around 0.6080 on Monday. The asset has displayed a vertical upside move, has reclaimed the critical resistance of 0.6100, and is expected to continue its upside journey with significant power. Last week, the kiwi bulls displayed reversal signals after printing a low near the psychological support of 0.6000.

The antipodean found strength after a decline in China’s Consumer Price Index (CPI). The economic data landed at 2.5%, lower than the expectations and the prior release of 2.8% and 2.7% respectively on an annual basis. While the monthly figure is negative by 0.1% against 0.2% of expectations and 0.5% of former release.

A decline in China’s inflation will force the People’s Bank of China (PBOC) to sound dovish and trim the Prime Lending Rate (PLR) further. And, more liquidity flush into the economy will spurt the volumes in economic activities. It is worth noting that New Zealand is a leading trading partner of China and Chinese economic data makes a decent impact on antipodean.

This week, the kiwi zone will display the Gross Domestic Product (GDP) data, which is expected to remain mixed. The economic data is seen higher at 0.8% against a contraction of 0.2%, reported in the prior quarter. However, a contraction of 0.2% is expected vs. an expansion of 1.2% on an annual basis.

 Meanwhile, the US dollar index (DXY) is marching towards the critical resistance of 109.00 with much confidence and zeal. The asset is expected to remain on the tenterhooks as investors are awaiting the release of the US CPI. The inflationary pressures are expected to scale down to 8.1% vs. 8.5% recorded earlier on an annual basis.

• Gold price stay firmer above short-term key hurdle, approaches 21-DMA.
• US dollar pullback joined firmer equities, sluggish yields to underpin XAU/USD run-up.
• Hawkish Fedspeak, geopolitical fears fail to recall gold sellers.
• Light calendar ahead of Tuesday’s US CPI could allow buyers to keep reins.

Gold price (XAU/USD) begins the week’s trading on the front foot around $1,717, after positing the first weekly gains in four. The metal’s latest upside could be linked to the US dollar’s broad weakness despite the hawkish Fedspeak. The reason could be linked to the market’s consolidation of the bullish bias amid hopes of overcoming the inflation woes.

Given the recently easing early signals of the inflation data from major economies, in contrast with firmer macros in other areas, market players seem to have gained confidence that the global central bankers will be able to tame the price pressure. In doing so, they manage to accept the hawkish comments/actions by the European Central Bank (ECB) and the US Federal Reserve (Fed).

Having witnessed the ECB’s 0.75% rate hike and Fed Chairman Jerome Powell’s push for more rate lifts, multiple Fed policymakers promoted tighter monetary policies in their last speeches before the pre-Fed blackout.

Among them, Federal Reserve Governor Christopher Waller was the prominent one as he said on Friday that he supports another significant hike in two weeks. On the same line was Kansas City Fed President Esther George saying, as reported by Reuters, “Case for continuing to remove policy accommodation is clear cut.” Furthermore, Cleveland Federal Reserve Bank President Loretta Mester said, “One inflation report is insufficient to alter one's outlook.” The policymaker also stated that he sees policy rates rising slightly above 4% by early 2023.

Elsewhere, US Treasury Secretary Janet Yellen mentioned that, during the CNN interview on Sunday, “Fed is going to need skill and luck to bring inflation down while maintaining labor market strength.” The policymaker also mentioned that the US consumers could experience a spike in gas prices in winter when the European Union significantly cuts back on buying Russian oil.

On a different page, Russian retreat from some of the Ukrainian territory and the Sino-American tussles are likely challenging the gold buyers amid fears of further tension.

Amid these plays, Wall Street marked another positive day and the US Treasury yields remained sluggish for the 10-year period, while being firmer for the two-year tenure.

Technical analysis

A daily closing beyond one-month-old resistance line, now support around $1,710, joins firmer RSI and an impending bull cross on the MACD to keep gold buyers hopeful.

That said, the 21-DMA hurdle surrounding $1,730 appears immediate resistance to watch for the XAU/USD bulls ahead of the August 25 swing high near $1,765.

Following that, a three-month-old descending trend line resistance near $1,775 could serve as the last defense for the gold sellers.

Meanwhile, a downside break of the $1,710 could defy the bullish breakout and direct gold sellers towards the $1,700 round figure.

In a case where the XAU/USD bears keep reins past $1,700, the latest low near $1,688 will precede the yearly bottom of $1,680 to challenge the metal’s further declines.

Additionally, the 61.8% Fibonacci Expansion (FE) of the bullion’s late April to early August moves, close to $1,660, might restrict the quote’s extra downside.

Gold: Daily chart

Trend: Limited upside expected

• EUR/USD is aiming to sift into the prior balanced market profile in a 1.0123-1.200 range.
• Declining gasoline prices and Fed’s soaring interest rates have trimmed consensus for the US inflation rate.
• ECB’s rate hike announcement has trimmed Fed-ECB policy divergence.

The EUR/USD pair has sensed selling interest right after opening around Friday’s high near 1.0100. The asset is expected to turn sideways as it is auctioning around a prior balanced balance profile placed in a range of 1.0123-1.200 and requires a substantial amount of strength to break the same. On a broader note, the major has shown some signs of bullish reversal and will maintain a bullish bias.

This week, the US Consumer Price Index (CPI) data will be of utmost importance. As gasoline prices have fallen dramatically in the US region and the soaring interest rates by the Federal Reserve (Fed) have squeezed liquidity, consensus for the US inflation is hinting at a decent decline ahead. The US inflation is expected to land at 8.1%, lower than the prior release of 8.5% on an annual basis. While the core CPI figure that doesn’t inculcate food and energy prices is seen higher by 10 basis points (bps) at 6%.

It seems that the prolonged energy-push inflation is losing momentum and durable goods inflation is getting more traction. Despite, a decline in US inflation consensus, the odds of a rate hike by the Fed are expected to remain stable as inflationary pressures are still widely deviated from the desired inflation rate of 2%.

Fed Governor Christopher Waller said on Friday that it was too soon to say whether inflation was moving meaningfully and persistently downward, as reported by Reuters. Fed policymaker added further that the tight labor market has faded signs of recession ahead and the extent of the rate hike will be more data-driven.

On the eurozone front, the rate hike announcement by the European Central Bank (ECB) infused fresh blood into the shared currency bulls. ECB President Christine Lagarde announced a 75 basis point (bps) rate hike to contain the inflation chaos. Also, a bumper rate hike announcement has trimmed the Fed-ECB policy divergence.

• GBP/USD pops higher in the open ahead of a key week for the greenback. 
• The US CPI will be a key event for the pair. 

After rallying to a high of 1.1648 on Friday, GBP/USD has gapped from a close of 1.1585 to 1.1640 so far as the US dollar comes under pressure from the off. 

The greenback fell away from a near 20-year high recently and dropped as low as 108.35 and was last down 0.6% at 108.93 as measured by the DXY index. Nevertheless, US rate futures are pricing in an 87% chance of the Fed hiking by 75 bps hike this month. The fresh US Consumer Price data this week is likely to be closely watched which could determine the size of the Federal Reserve's rate hike at this month's policy meeting.

''Core prices likely stayed firm in August, with the series registering another 0.3% MoM gain. Shelter inflation likely maintained strong momentum, though we look for used vehicle prices to retreat again. Importantly, gas prices likely brought additional notable relief for the headline series, declining a sharp 11% MoM. Our MoM forecasts imply 8.0%/6.0% YoY for total/core prices,'' analysts at TD Securities explained. 

Meanwhile, after a modest dip the previous day following the death of Queen Elizabeth, the pound is firm on the sentiment over a hawkish Bank of England. The central bank said on Friday that it would delay its next monetary policy meeting by one week due to the period of royal mourning. 

''We expect this to move the Bank of England from a state of front-loaded 75 bps rate rises to one in which we will see a more gradual but also a more sustained path of rate increases,'' analysts at Rabobank said. 

''We still favour a 50 bps increase in Bank rate to 2.25% next week; a 50 bps hike in November looks now likely too. The risks remain skewed to the upside.''

• AUD/USD bears are lurking for the open.
• Bulls need to stay in control above 0.6820.

The week ahead will be key for this pair considering the Aussie Labour market and the US Consumer Price Index with the Federal Reserve fast approaching. Meanwhile, for the open, the price is trapped between 4-hour support and resistance. The following illustrates the importance of 0.6820 on the downside and 0.6880 on the upside with prospects for 0.6950 for the week ahead.

AUD/USD prior analysis

It was stated that the W-formation's support was sturdy and a break of the trendline would open the risk of a firmer rally and throw the daily chart's downside thesis into the wind. 

AUD/USD live market

The price rallied and broke through resistance which now leaves the upside bias intact for the day ahead. The bulls will need to stay committed above 0.6815/20 for the 38.2% Fibonacci retracement to serve as a demand area. On the other hand, if the bulls give way there, then the area of last defence could come in at the neckline of the daily W-formation as follows: