AUD/USD Spikes On Strong CPI Figures

Market Brief

It was a quiet FX trading session in Asia as most G10 currencies treaded water. EUR/USD was little changed and edged up 0.03% to 1.0891. In the short-term, the bias remains on the downside, even though we believe that further dollar gains are unlikely. On the downside, a key support can be found at 1.0822 (low from October 3rd), while on the upside the main resistance lies at around 1.12-1.13 (previous highs).

The pound sterling stabilised at around 1.2170 overnight after tumbling at 1.2083 on Tuesday amid a broad, but short-lived, USD rally. On the downside, the 1.1841 level will act as main support, while on the upside the high from October 7th at 1.2477 remains the closest resistance.

G10 Advancers & Global Indexes Table

In Australia, the better-than-expected Q3 inflation report gave a strong boost to the Aussie. The Australian currency rose 0.75% against the pound sterling, 0.70% against the greenback and 0.60% against the Japanese yen as the consumer price index printed at 1.3%y/y, beating consensus of 1.1% and previous quarter’s reading of 1%. The trimmed mean gauge – that excludes both ends of the distribution – came in in line with the median forecast at 1.7%.

Consequently, AUD/USD jumped more than 1% in a matter of seconds, hitting 0.7709, as the strong inflation figure decreased the likelihood of an interest rate cut from the RBA. Finally, the currency pair eased slightly at around 0.7690. On the long-term, AUD/USD has still been unable to validate a clear break of the top of its declining channel, which currently stands at around 0.7650.

In the equity market, Asian equities were wearing red following the negative lead from Wall Street. Indeed, the S&P 500 was down 0.38% on Tuesday amid disappointing company earnings. The Dow slid 0.30% and the Nasdaq fell 0.50%. In Asia, only Japanese stocks were able to keep their heads above water with the Nikkei edging up 0.15% and the broader Topix index. Elsewhere, the Shanghai Composite fell 0.53%, the Hang Seng slid 0.82%, while in South Korea the KOSPI was off 1.14%.

Today traders will be watching retail sales from Italy; MBA mortgage application, wholesale inventories, services and composite PMI, new home sales and crude oil inventories from the US; trade balance from New Zealand.

Today’s Calendar

Currency TechEUR/USDR 2: 1.1352R 1: 1.1058CURRENT: 1.0906S 1: 1.0822S 2: 1.0711

GBP/USDR 2: 1.2857R 1: 1.2477CURRENT: 1.2169S 1: 1.2090S 2: 1.1841

USD/JPYR 2: 111.45R 1: 107.49CURRENT: 104.15S 1: 102.80S 2: 100.09

USD/CHFR 2: 1.0328R 1: 1.0093CURRENT: 0.9933S 1: 0.9632S 2: 0.9522

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