Morning comment 16.09.2015

Main points for Today

  • US data did little to change expectations of a rate hike
    • Retail sales decelerated in August, while industrial production for the same month fell more than expected. July figures however, were both revised up.
    • The mixed outcome, with August figures missing market consensus and the prior readings being revised up, kept USD supported on balance.
    • Markets remain mixed on the likelihood of a rate hike, with a September lift-off priced a probability of around 32%, slightly higher from 28% on Monday.
    • Investors will focus today on the US headline and core CPI rates for August. Ahead of probably the most highly anticipated FOMC meeting since tapering began, these figures are going to get more attention than usual from investors, as it could help them to re-price September rate hike expectations.
    • The headline figure is expected to remain unchanged, while the core rate is forecast to rise from the month before. In such case, USD could gain across the board.
  • Today:
    • Eurozone: Final CPI for August. As usual, the final figure is expected to confirm the preliminary reading, thus the market reaction could be limited at the release.
    • UK: Employment data for July. Another decline in the unemployment rate and accelerated growth in average weekly earnings could support Gov. Carney’s recent comment that UK’s interest rates could rise “at the turn of this year”. Therefore, another strong wage growth is likely to strengthen GBP. 
    • Sweden: Riksbank releases the minutes from its September monetary policy meeting.
    • US: Besides the CPI data, the NAHB housing market index is for September is also coming out.
  • GBP/USD traded lower on Tuesday, breaking below the support (now turned into resistance) of 1.5400 (R1). However the decline was halted by the next hurdle at 1.5330 (S1). In my opinion, the break below 1.5400 (R1) has turned the short-term bias somewhat negative, but I see the possibility that the next wave is likely to be an upside correction, perhaps to test the 1.5400 (R1) line as a resistance this time. Today, we get the UK employment data for July. A decline in the unemployment rate and accelerated growth in average weekly earnings could encourage buyers for such a move. Our short-term oscillators support the notion as well. The RSI, although negative, has bottomed and is now pointing up, while the MACD shows signs of bottoming slightly below its zero line. Switching to the daily chart, I see that Cable slid after finding resistance near the 80-day exponential moving average. This is another reason I believe that the short-term picture is negative and that any positive moves are likely to be short-lived.
  • Support: 1.5400 (S1), 1.5330 (S2), 1.5290 (S3)
  • Resistance: 1.5460 (R1), 1.5500 (R2), 1.5545 (R3)
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