Our strategist Bipan Rai wrote Lowe’s comments pretty much suggest that the RBA is done easing this cycle. In this case, the RBA is OK with an inflation undershoot and won’t be too perturbed by an underwhelming result for Q3 CPI in a few weeks. Add the RBA to the list of central banks that are backing off from stimulus now.
AudUsd pretty much unchanged throughout Lowe’s speech, staying put in the 0.7630’s. See that some clients are trying to buy Aussie on dips but as mentioned yesterday, rumour of exporters bidding 0.7575-85 area. A weak Usd pushed AudUsd towards 0.7650. Resistance near 0.7700, break above 0.7705 will likely trigger stop buy orders. AudNzd had a move lower following the Kiwi CPI – down from 1.0690’s to 1.0623. There is a chatter of leveraged names bidding the cross at 1.0610. AudNzd made a turn and reversed back to 1.0670’s, following Lowe’s Q&A – that current level of Aussie and interest rates is suitable for economy.
Kiwi Q3 inflation came in higher than expected, +0.2% for both quarterly and annually. NzdUsd had a squeeze as the numbers came out from 0.7135 and printed high 0.7185. Kiwi got to 0.7190 on broad Usd weakness. 100-Day SMA comes in at 0.7176 and I think the bigger challenge is at 0.7210-30, which Sam thinks is a good entry level to go short with stop above 0.7260.
UK will publish Sept CPI numbers today. Market is expecting the annual core inflation rise of 0.9% versus current 0.6%. BOE officials have said that the central bank is willing to overlook above-target inflation, keeping monetary policy accommodative.
UsdJpy is one difficult pair. Japanese have been better sellers but technical accounts are taking in the supply. There is the 100-Hour SMA at 103.77, hourly technical trendline at 103.71. Our trader Sam believes that if we were to break through these support, long positions will get little nervous and targets Ichimoku Cloud at 103.53.
Canadian dollar rose on back of weak dollar – stops were taken out sub-1.3100. We see better buying coming in beneath 1.3065. $500mio notional of 1.3100 option strike expiring today – so think we might slip into dull session towards the New York cut. Bank of Canada meets on Wednesday. We do not see any change in rates but expect BOC to be dovish. Buy orders are light while offers are better in the 1.3190’s.
Euro advanced as well but compared to the rest, it was meagre. Option related interests at 1.1000 linked to an expiry today New York cut worth about Eur2.3bn. I hear weak stops above 1.1035 but offers are said to be hovering atop 1.1065.