Asian Open: USD Lower Despite Strong CPI and Hawkish Fed

It appears to be a case of “buy the rumour, sell the fact” for the US dollar, as prospects of higher inflation effectively confirming a November taper and earlier hike sent the dollar lower.

20211014moversCI

Asian Futures:

  • Australia's ASX 200 futures are up 50 points (0.69%), the cash market is currently estimated to open at 7,322.50
  • Japan's Nikkei 225 futures are up 70 points (0.25%), the cash market is currently estimated to open at 28,210.28
  • Hong Kong's Hang Seng futures are down 0 points (0%), the cash market is currently estimated to open at 24,962.59

UK and Europe:

  • UK's FTSE 100 index rose 11.59 points (0.16%) to close at 7,141.82
  • Europe'sEuro STOXX 50 index rose 28.19 points (0.7%) to close at 4,083.28
  • Germany's DAX index rose 102.51 points (0.68%) to close at 15,249.38
  • France's CAC 40 index rose 49.27 points (0.75%) to close at 6,597.38

Wednesday US Close:

  • The Dow Jones Industrial fell -0.53 points (0%) to close at 34,377.81
  • The S&P 500 index rose 13.15 points (0.31%) to close at 4,363.80
  • The Nasdaq 100 index rose 112.492 points (0.77%) to close at 14,774.60

 

Learn how to trade indices

 

Indices: Wall Street laps up lower yields

So it looks almost certain that the Fed will now taper in November, given yesterday’s CPI data and FOMC minutes. Inflation rose 0.4% in September (up from 0.3% in August and above the 0.3% expected), taking its annual rate to 5.3% (5.3% prior). Core CPI rose 0.2% in September, up from 0.1% in August, or 4% YoY. Of course, rising energy prices have been a big component of the broader inflation read, yet with core CPI also rising (which strips out food and energy prices) then rising prices are clearly a broader issue.

Bond markets reacted accordingly with the front end of the curve (2-year) rising 1.5 bps to 0.36%. Yet the long end of the curve (30-year) fell for a second day by -5.6 bps as stagflation concerns continued to weigh on sentient. Yet lower yields helped Wall Street break a 3-day losing streak with the S&P 500 printing a small bullish hammer. As this stage we continue to suspect its correction for its all-time has is now complete, so are seeking bullish setups. The Nasdaq enjoyed the lower yield environment and rose 0.77%.

 

ASX 200 Market Internals:

20211014asxperformanceCI

ASX 200: 7272.5 (-0.11%), 13 October 2021

  • Real Estate (1.54%) was the strongest sector and Materials (-1.07%) was the weakest
  • 9 out of the 11 sectors closed higher
  • 9 out of the 11 sectors outperformed the index
  • 121 (60.50%) stocks advanced, 70 (35.00%) stocks declined
  • 63% of stocks closed above their 200-day average
  • 40% of stocks closed above their 50-day average
  • 45% of stocks closed above their 20-day average

Outperformers:

  • + 13.4%-A2 Milk Company Ltd(A2M.AX)
  • + 8.72%-GUD Holdings Ltd(GUD.AX)
  • + 6.54%-Star Entertainment Group Ltd(SGR.AX)

Underperformers:

  • ·-5.34%-Fortescue Metals Group Ltd(FMG.AX)
  • ·-4.62%-Mineral Resources Ltd(MIN.AX)
  • ·-4.32%-Bank of Queensland Ltd(BOQ.AX)

 

 

Forex: AU employment and China CPI up next

20211014fxmoversCI

The dollar was broadly lower and the weakest major overnight, and lost most ground against CHF, seeing USD/CHF falling 0.8% on the day. CHF and NZD were the strongest major currencies. Outside the majors, the dollar fell around -1.15% against MZD and ZAR, and around -1% for SEK and -0.8% against NOK. The US dollar index (DXY) fell around -0.5% during its most bearish session since in 3-weeks.  This allowed EUR/USD to sit at the top of the leader board, rising 0.62% during its most bullish session in 5-months.

Australian employment data is scheduled for 11:30 AEST, followed by Chinese inflation data at 12:30 AEST both of which AUD is sensitive too. There’s not much in the way of data in the European session, although initial jobless claims and producer prices (inflationary inputs) are released at 23.:30 AEST.

AUD/USD reaffirmed support around 0.7320 and returned to Tuesday’s high. The inverted H&S target around 0.7490 remains in play. GBP/AUD is trying to form a low around the 200-day eMA and monthly S1 pivot. That said, momentum remains bearish overall so a break of Tuesday’s low assumes bearish continuation.

Commodities: Strongest day for gold in 7-months

Gold prices ripped higher by 2.1% during its most bullish day in 7-months. This puts an end to its 6-day choppy range and places momentum back in line with our bullish bias, which was forged on the back of the large bullish engulfing candle at the 1721 low and break of trend resistance on October 4th.\

20211014goldCI

 

As much as we like the trend structure on the daily chart for bullish setups, we are mindful that 1800 is likely to cap as resistance initially. We would therefore welcome any pullback towards 1780, or the breakout level of 1770 where the monthly pivot resides to increase the potential reward to risk ratio below 1800.

Silver closed above $23 although it remains below trend resistance. A break above 23.32 invalidates the bearish channel and confirms an inverted head and shoulders pattern, which projects a target around. Copper also rallied to a 10-week high to further suggest its corrective low was seen in August at $4.00 and at its 200-day eMA.

 

Up Next (Times in AEDT)

20211014calendarAEST

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

 

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.