Daily Key points: Market focus shifts towards US CPI rates

The US Dollar rose yesterday, getting support possibly also from safe haven inflows and ahead of the release of the US CPI rates for October, which after the release of the employment report for the same month last Friday and the midterm elections is considered the next big test for the greenback. The headline rate is expected to slow down to 8.0% yoy from prior month’s 8.2% yoy and if actually so may enhance market expectations that inflation has peaked and is slowing down which in turn may ease the Fed’s rate hiking path and thus weaken the USD. On the flip side though we must note that the month on month rate is expected to accelerate to 0.6% mom, if compared to September’s 0.4% mom and if actually so, may be implying that inflationary pressures are still simmering under the surface. Such a scenario in conjunction with the fact that even should the headline rate slowdown to 8.0% yoy, is still a far cry from the Fed’s target of 2.0% yoy may not allow the Fed to retreat from its hawkish aggressiveness and allow for the USD to advance further. It should be noted that the gold’s price dipped yesterday, as a result of USD strength and the release of the US CPI rates could have ripple effects also on the shiny metal’s price as well as US stockmarkets. US Stockmarkets dropped yesterday with all three main indexes, the Dow Jones, S&P 500 and Nasdaq being in the reds after a more cautious sentiment took over, while the losses were enhanced as the Republicans did not seem to make the big wins expected in the midterm elections. Republicans yet are still be poised to get control for the House of Representatives, but results for the Senate are still considered to be indecisive and we may have to wait until the last vote is counted for the actual result. Overall, the results of the midterm elections may actually provide the Republicans the chance to bring the US Government to a political gridlock thus curbing the expansionary fiscal policy of US President Biden, yet the failure to produce a red wave may be a slap on the face for the efforts of former US President Trump for a re-run in the 2024 elections.

AUD/USD dropped after testing the 0.6520 (R1) resistance line, which for a brief period was breached. We tend to maintain a bias for a sideways motion of the pair currently, given also that the RSI indicator dropped below, yet remains close to the reading of 50. Should the bears take over we may see AUD/USD breaking the 0.6345 (S1) support line and aim for the 0.6170 (S2) level. Should the bulls be in charge of the pair’s direction, we may see AUD/USD breaking the 0.6520 (R1) resistance line and aim for the 0.6670 (R2) level.

USD/JPY rose after testing the 145.15 (S1) support line yesterday, yet stabilised during today’s Asian session. In its upward movement the pair broke the downward trendline guiding it since the 4 of November hence we switch our bearish outlook in favour of a bias for a rangebound motion. Also the RSI indicator is running along the reading of 50 also implying a rather indecisive market. Should the selling interest be renewed, we may see USD/JPY breaking the 145.15 (S1) support line and aim for the 143.50 (S2) level. Should the pair find fresh buying orders along its path we may see the pair breaking the 147.00 (R1) resistance line and aim for the 148.35 (R2) level.

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Today in the European session, we note the release of Norway’s and the Czech Republic’s CPI rates, both being for October, while on the monetary front ECB’s Enria and Schnabel, as well as BoE’s Tenreyro are scheduled to make statements. The highlight of the day though is expected to be the release of the US CPI rates for October in the American session, while we also note the weekly initial jobless claims figure. On the monetary front we note that Philadelphia Fed President Harker, Dallas Fed President Logan, BoC Governor Tiff Macklem and Kansas Fed President George are scheduled to make statements. During tomorrow’s Asian session we note the release of Japan’s corporate goods prices for October, while NY Fed President Williams will be making some statements.