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  • Writer's pictureMike Paterson

Markets wait on US CPI data

Thursday 13 October 2022

No prizes for guessing the market's main focus today as we wait on US CPI data and further clues as to how far the Fed will need/want to hike next month. Yesterday's PPI was a little stronger overall but Core YoY a tad softer. Last night's FOMC Minutes didn't surprise and we will expect continuation of hawkish tones from the Fed with inflation levels key hence todays CPI focus but how much is now factored in? Fragile geopolitical backdrop still as Ukraine/Russia war continuing.

Equities and oil prices have remained generally flat ahead of the data.USD underpinned overall still but a decent recovery in the Pound with some speculation that pension funds may be selling overseas assets and therefore needing to buy GBP with the proceeds. BOE gilt market operations are due to finish tomorrow but given this week's turmoil who knows for sure.

As always, remember that conjecture and second-guessing should stand to one side on data and CB releases. Focus on the price action and let the algos do the heavy lifting/dropping. The important thing is to identify your preferred risk/reward entry/exit levels.

GBPUSD: Good two-way business in the past 24 hours with the pair quite resilient but let's see where we are after US CPI. Cross flows still having a big impact too. EURGBP: 0.8860 capping still but dropping back to test 0.8725-30 on the GBP rebound. I expect more two-way business to continue with the Eurozone facing issues of its own. Large option interest at 0.8750 today. GBPJPY: A good bounce from 161.00 yesterday amid the GBP rebound and underpinned USDJPY but capping at 163.30 so far. USDJPY underpinned into 146.30-50 now. EURUSD: Still under pressure of its own amid the general USD demand but holding at 0.9685 this time and looking to test resistance around 0.9730-35 again. Cross flows, risk, Ukraine and ECB conjecture all in the frame still as well as USD flows. USDJPY: Holding above 146.50 now as the grind higher continues amid the general USD demand but still subject to soggy-risk JPY demand. EURJPY: Support now at the old 142.25 reistance and testing 142.80 amid core pair dip demand. USDCHF: Rally failure above 1.0000 and now testing 0.9980 amid some general CHF demand returning with support expected at 0.9950-60 with help from the general USD and EURCHF dip demand.EURCHF: Being pulled up by EURUSD rally but CHF demand still expected. SNB casting its shadow overall.

AUDUSD: Support now into 0.6260 amid a little USD supply but sellers still poised into 0.6300-20. NZDUSD also rallying on the USD supply/better risk after holding 0.5600 in latest retreat so and testing 0.5635. USDCAD: Ranging still and I expect two-way business overall still amid the fickle oil and risk variables.

Let's continue to be careful out there.

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