Today’s Major Headlines
- The DXY is stuck in the middle of its range (101/102) as markets brace for US CPI later in the session
- Chinese equities clear losers today as weak trade data continues to concern
- US10Y reclaims 3.5% to the upside as markets wait for inflation data
The Dollar index remains stuck in the middle of it’s 101-102 range as traders wait for the release of US CPI data a little later in the session. A big enough surprise in CPI today could be the trigger that sees markets break out of recent ranges across major asset classes.
However, it’s worth noting that the market’s reaction to a miss, which fits the view for year-end rate cuts, are expected to create a bigger reaction.
The CPI data release today will have significant impact on US10Y, expect the correlating markets to have some volatile swings (USD, JPY, BONDS & GOLD).
US10Y in the middle of its recent range a surprise could see the either side of the range being tested.
Today we see JPY the strongest and AUD weakest. Is this an early note for risk off? Moreover, AUD is struggling after yesterdays sell off in China.
EURJPY is a key chart to watch, as we see the yield differentials have deteriorated, along with the growth outlook. EURO still looks susceptible to a move lower with an overcrowded long positioning.
In order for the move lower, we need to see US10Y drop to give the JPY added strength.
Now we wait on CPI data: sitting on the side-lines would be the safest option. A big upside surprise in CPI could see the pair pushing higher (giving us opportunities to short it from more attractive levels), and if we see a big downside surprise in CPI, that could provide at market opportunities.
The other key focus for today’s US CPI is, of course, on the USD. Given how low the Dollar has been trading in recent weeks, a higher-than-expected CPI might be a more attractive opportunity to trade the USD.
Nothing wrong with expecting some downside if CPI comes in really weak, but the risk of another bounce from the recent range low makes shorting opportunities on the USD less attractive.
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