September’s US CPI rates in the market’s focus

The USD remained relatively stable against its counterparts yesterday, despite some slight bearish tendencies, as did gold’s price and US stock markets, in a sign of wider market uncertainty. On a fundamental level, the tensions in the US-Sino trade relationships remain the dominant theme for the markets and negotiations may be underway between the two economic powerhouses. US President Trump and Chinese President Xi Jinping are set to meet next week and possible market expectations for the tensions to start thawing may allow renewed support for the greenback and US equity markets while may weigh on gold’s price. On a monetary level, the market’s focus is set on the Fed’s interest rate decision, and a 25-basis-point rate cut is almost fully priced in, with expectations for more easing being prominent. Given the ongoing US Government shutdown, US financial releases are scarce, thus adding more emphasis to the release of the US CPI Rates for September later today. The headline rate is expected to accelerate slightly and the core rate to remain unchanged, with both rates expected to come at 3.1%, implying some resilience of inflationary pressures in the US economy and staying clearly above the Fed’s 2% target. Should the actual rates meet their respective forecasts or even accelerate beyond expectations we may see the USD getting some support, while the release could at the same time weigh on US stock markets and gold’s price, as the doubts among Fed policymakers for the necessity of further rate cuts may be boosted. On the flip side should the rates slow down or fail to reach the analysts’ forecasts, we may see the release weighing on the USD and at the same time supporting US stock markets and gold’s price as the market’s dovish expectations for the Fed’s intentions could be enhanced.

XAU/USD shows signs of stabilisation remaining well between the 4185 (R1) resistance line and the 4000 (S1) support level. Given the interruption of the upward movement of the past nine weeks, we currently maintain a bias for a sideways motion between the prementioned levels. We note though that the RSI indicator remains between the readings of 50 and 70, implying some bullish tendencies, yet nothing as convincing for the time being. For a bullish outlook to re-emerge, we would require a clear break above our 4185 (R1) resistance line and the precious metal’s price to continue higher by breaking the 4375 (R2) level clearly, thus forming a new higher peak. On the other hand, for a bearish outlook we would require a clear break below our 4000 (S1) support level with the next possible target for the bears being our 3850 (S2) level.

EUR/USD continued to remain just above the 1.1570 (S1) support line yesterday. A sideways motion scenario continues to seem valid at the current stage as the price action of the pair with few exceptions remains well between the R1 and the S1. Some slight bearish tendencies may be present but nothing conclusive as the RSI indicator remains slightly below the reading of 50. For a bearish outlook we would require the pair to break the 1.1570 (S1) support line and start aiming for the 1.1265 (S2) support level. For a bullish outlook we would require a clear break above the 1.1825 (R1) resistance level and for the pair start aiming for the 1.2115 (R2).

Other highlights for the day:

UK’s retail sales for September showed some resilience easing worries for pound traders regarding the UK economic outlook and we note also the release of the UK’s preliminary PMI figures for October. Across the Channel, we highlight the release of France’s Germany’s and the Euro Zone’s preliminary PMI figures for October, and a possible improvement of the data possibly implying and improvement of economic activity in the Euro area could provide some support to the lately lazy common currency. From the US we get the preliminary PMI figures for October and the final UoM consumer sentiment also for October.

XAU/USD Daily Chart

• Support: 4000 (S1), 3850 (S2), 3710 (S3)
• Resistance: 4185 (R1), 4375 (R2), 4600 (R3)

EUR/USD Daily Chart

• Support: 1.1570 (S1), 1.1265 (S2), 1.1065 (S3)
• Resistance: 1.1825 (R1), 1.2115 (R2), 1.2265 (R3)

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