August’s US CPI Rate in the epicenter of attention

Peter Iosif, ACA, MBA IronFX

August’s US CPI rates to shake the markets

The USD got some support in the FX market yesterday re-establishing its dominance. Please note that the US PPI rates for August accelerated beyond market expectations also supporting the USD. Today we highlight the release of the US CPI rates, also for August, and a possible acceleration beyond market expectations could push the USD higher and weigh on gold’s price and US equities, as the pressure on the Fed to tighten its monetary policy next Wednesday could intensify.

Oil corrects lower

Oil prices corrected lower in today’s Asian session, yet for the week remain high near $100 per barrel. Tensions are still high in the Middle East are still on the escalation path. Iran’s allies, Houthis, have taken control over the port of Mocha, in Yemen, underscoring Iran’s far reach beyond the Strait of Hormuz, also at the Bab al-Mandab Strait, controlling the Red Sea. Should market worries about the supply lines of the international oil market intensify further we may see oil prices rising even further.

Gold’s price edges lower

Gold’s price edged lower yesterday, as the strengthening of the USD weighed on the precious metal’s price. Worries for inflationary pressures in the US economy tended to enhance market expectations for a tightening of the Fed’s monetary policy, weighing on gold’s price. Furthermore, US bond yields continued to rise, reaching levels not seen in almost twenty years, enhancing the attractiveness of the bond market as an alternative safe haven investment destination and also weighing on gold’s price.

US equities in the reds

US stock market indexes ended in the reds yesterday, as on a fundamental level the rise of oil prices and US bond yields tended to weigh on US equities. Given the release of August’s US CPI rates today and the Fed’s interest rate decision next Wednesday, fundamentals could lead US equities and a possible intensification of the market worries could enhance the bearish tendencies.

Other highlights for today

Today we get UK’s July GDP and manufacturing output rates and from the US the preliminary UoM consumer sentiment for September. We also note that ECB’s Lane, Kocher and Lagarde are scheduled to speak.

Charts to keep an eye out

Technically, USD/JPY corrected higher yesterday yet remained below the 155.00 (R1) resistance line. The market sentiment remains strongly bearish given that the RSI indicator remains near the reading of 30. We maintain our bearish outlook for the pair despite an interruption of USD/JPY’s downward motion, yet issue a warning for a possible stabilisation of the pair. Should the bears renew their dominance over the pair, we may see USD/JPY breaking the 152.10 (S1) support line and start aiming for the 149.40 (S2) support base. Should the bulls take over, we may see USD/JPY breaking the 155.00 (R1) resistance line and continue higher aiming for the 157.50 (R2) resistance level.

WTI’s price rose breaking the 93.30 (S1) resistance line clearly, turning it now to support and continued higher temporarily breaking the 98.50 (R1) resistance level, before correcting lower, during today’s Asian session. The market sentiment remains strongly bullish for the commodity’s price, given that the RSI indicator remains high. We intend to maintain yesterday’s bullish outlook for WTI as long as the upward trendline guiding it remains intact. Should the bulls remain in charge, we may see WTI’s price breaking the 98.50 (R1) resistance line and start aiming for the 103.65 (R2) resistance level. Should the bears take over, we may see WTI’s price breaking the 93.30 (S1) support line and start aiming for the 88.60 (S2) support barrier.

Calendar follows

USD/JPY daily chart

Support: 152.10 (S1), 149.40 (S2), 146.50 (S3).
Resistance: 155.00 (R1), 157.50 (R2), 160.50 (R3).

WTI Cash daily chart

Support: 93.30 (S1), 88.60 (S2), 82.00 (S3).
Resistance: 98.50 (R1), 103.65 (R2), 108.85 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

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