Mid-Day Report: Markets Stay in Consolidation Mode in General

Dollar stays in tight range against other major currencies in early US session except that some weakness is seen against Loonie. FOMC will start the two day policy meeting today and markets are eager to see if Fed will change the language in the statement to reflect that rate hike is nearing. Released from US, PPI rose to 1.8% yoy in August as expected while core CPPI rose to 1.8% Yoy versus expectation of 1.7% yoy. Canadian manufacturing shipments rose 2.5% mom in July versus expectation of 1.1% mom.

Sterling dips mildly today after weaker than expected inflation data. Headline CPI slowed to 1.5% yoy in August versus expectation of being unchanged at 1.6% yoy. That’s the lowest level in five years. Headline CPI rose to 1.9% yoy versus expectation of 1.8% yoy. RPI slowed to 2.4% yoy versus expectation of 2.5% yoy. PPI input dropped to -7.2% yoy, PPI output dropped to -0.3% yoy, both below expectation. PPI output core was unchanged at 0.9% yoy. Loss in Sterling is limited as markets await the heavy weight event of BoE minutes on Wednesday and Scottish independence referendum on Thursday.

German ZEW economic sentiment dropped for the ninth straight month to 6.9 in September, down from 8.6 but beat expectation of 5.6. Current situation gauge dropped sharply to 25.4 versus consensus of 42. Eurozone ZEW economic sentiment dropped to 14.2 versus expectation of 21.3. ZEW president Clemens Fuest noted that “The economic environment is still marked by great insecurity”, with danger of sanctions spiral with Russia and disappointing development in the Eurozone economy. The uncertainty over the outcome of Scottish independence referendum also rattled sentiments.

In the RBA minutes for the September meeting, policymakers appeared more confidence over the economic outlook, noting”measures of business conditions had improved and there was evidence suggesting that growth in non-mining business investment would pick up modestly over the coming quarters”. The minutes also noted that “dwelling investment had expanded further in the June quarter and that leading indicators pointed to continued growth in the months ahead” while “a wide range of indicators showed that conditions in the established housing market continued to strengthen”. That said, the RBA did not offer any hints on the timing and direction of its next monetary decision.

Daily Pivots: (S1) 0.9323; (P) 0.9348; (R1) 0.9375; More….

USD/CHF’s consolidation from 0.9395 temporary top is still in progress and intraday bias remains neutral. Deeper retreat could be seen but downside should be contained well above 0.9175 support. Larger rally is expected to resume later. Break of 161.8% projection of 0.8702 to 0.9036 from 0.8855 at 0.9395 will target 261.8% projection at 0.9729 next.

In the bigger picture, price actions from 0.9971 are viewed as a medium term correction pattern and should have completed with three waves down to 0.8698. Rise from 0.8698 should target a test on 0.9971 high first. Decisive break there will extend the whole long term rise from 0.7065. We’ll hold on to this bullish view as long as 0.9036 support holds.

USD/CHF 4 Hours Chart

USD/CHF Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
01:30
AUD
RBA Minutes

08:30
GBP
CPI M/M Aug
0.40%
0.40%
-0.30%

08:30
GBP
CPI Y/Y Aug
1.50%
1.60%
1.60%

08:30
GBP
Core CPI Y/Y Aug
1.90%
1.80%
1.80%

08:30
GBP
RPI M/M Aug
0.40%
0.50%
-0.10%

08:30
GBP
RPI Y/Y Aug
2.40%
2.50%
2.50%

08:30
GBP
PPI Input M/M Aug
-0.60%
-0.20%
-1.60%
-1.70%
08:30
GBP
PPI Input Y/Y Aug
-7.20%
-6.60%
-7.30%
-7.50%
08:30
GBP
PPI Output M/M Aug
-0.10%
-0.10%
-0.10%

08:30
GBP
PPI Output Y/Y Aug
-0.30%
-0.20%
-0.10%

08:30
GBP
PPI Output Core M/M Aug
0.10%
0.00%
0.00%
-0.10%
08:30
GBP
PPI Output Core Y/Y Aug
0.90%
0.90%
0.90%

09:00
EUR
German ZEW (Economic Sentiment) Sep
6.9
5.6
8.6

09:00
EUR
German ZEW (Current Situation) Sep
25.4
42
44.3

09:00
EUR
Eurozone ZEW (Economic Sentiment) Sep
14.2
21.3
23.7

12:30
CAD
Manufacturing Shipments M/M Jul
2.50%
1.10%
0.60%
0.90%
12:30
USD
PPI M/M Aug
0.00%
0.10%
0.10%

12:30
USD
PPI Y/Y Aug
1.80%
1.80%
1.70%

12:30
USD
PPI Core M/M Aug
0.10%
0.10%
0.20%

12:30
USD
PPI Core Y/Y Aug
1.80%
1.70%
1.60%

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