28th October 2020 - AUD remain rangebound as market turns towards CPI data for clues to direction


Good Morning,

Market Headlines

Wall Street was less eventful on Tuesday but managed to see stocks looking healthier, albeit little changed. On Monday, all the three major stock indexes chalked up their biggest declines in about four weeks following the news that a record number of new coronavirus cases across Europe and in the United States and as the elusive stimulus rattled investors. Meanwhile, Wall Street's fear gauge VIX hovered at its highest level since early September on election jitters. Commodities, Brent crude oil futures rose 1.8% to $41.20, copper is unchanged, iron ore rose 0.5% to $115.65, and gold rose 0.3%.

Currency

AUD/USD: 0.7118 – 0.7147

EUR/USD: 1.1797 – 1.1838

GBP/USD: 1.3001 – 1.3079

USD/JPY: 104.39 – 104.83

USD/CAD: 1.3143 – 1.3197

NZD/USD: 0.6681 – 0.6724 (a one-month high)

AUD/JPY: 74.43 – 74.77

AUD/NZD: 1.0620 – 1.0667 (a three-month low)

AUD Thoughts

Australia’s Q3 CPI is due today at 11.30am EST. A 1,400% rise in childcare prices and a lift in fuel prices will drive a bounce in headline inflation in Q3. The market expect a 1.5%qtr and 1.1%qtr jump respectively (prior: -1.9%qtr). The trimmed mean should see a flat result however, with rents and the Homebuilder grant weighing, and inflation elsewhere restricted by narrowly-focused consumption (prior: -0.1%qtr, market f/c: 0.3%).

From a technical perspective, the aussie remains neutral, trapped in a range between 0.7100 and 0.7145/60. On the upside, a confirmation above 0.7160 (October 23 high) would have to extend above the 50-day SMA, at 0.7195 before heading to 0.7235 (October 12 high)

On the downside, below 0.7100 (October 23, 26 lows and 100-day SMA), bearish momentum might increase and push the pair towards 0.7025 (October 20 low) and 0.7000 (September 25 low).

Event Risk Data Today

Australia: A 1,400% rise in childcare prices and a lift in fuel prices will drive a bounce in headline inflation in Q3. The market expect a 1.5%qtr and 1.1%qtr jump respectively (prior: -1.9%qtr). The trimmed mean should see a flat result however, with rents and the Homebuilder grant weighing, and inflation elsewhere restricted by narrowly-focused consumption (prior: -0.1%qtr, market f/c: 0.3%).

NZ: Employment indicators posting broadly flat job growth in September (prior: 0.3%).

US: Wholesale inventories have been supported by durables and autos, though are still down 5.2%/yr (prior and market f/c: 0.4%).

Canada: The Bank of Canada is expected to maintain the current stance of policy at the Oct policy meeting. The Monetary Policy Report’s assessment of risks will be a focus given the recent rise in COVID-19 cases in the US and Europe.

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