PPI Rates and Fed’s September Minutes in Focus

The USD continued to edge lower against its counterparts as the market’s expectations for the Fed to remain on hold in its next meeting tended to intensify given the comments made by Fed policymakers. It was characteristic that San Francisco Fed President Daly mentioned that the recent rise of US bond yields could substitute for another rate hike, practically easing any pressure on the Fed to actually raise rates once again within the year. Similar comments were made also by Minneapolis Fed President Kashkari, while the latest PPI rates have further supported the view that inflationary pressures may be easing.

We highlight the release of the US PPI rates for September in today’s American session, ahead of the CPI release for the same month tomorrow, and note that they are expected to remain unchanged. Such a scenario though could imply that inflationary pressures remain at a producer level in the US economy and may provide some support for the greenback.

Yet the highlight of the day may be the release of the Fed’s September meeting minutes late in today’s American session, as the document is expected to provide deeper insights into the bank’s views. Should the document show that Fed policymakers tend to lean more on the hawkish side and favor another rate hike before the year’s end, we may see the USD getting some support, especially if recent PPI rates continue to point toward persistent inflationary pressures, and vice versa.

Overall, we expect the FX market to remain USD-driven in the next 48 hours given the gravity of US releases scheduled. At this point, we have to note that major US stock market indexes continued to rise for a fifth day in a row yesterday, supported by the prospect that the Fed has reached the end of its rate-hiking cycle, while recent PPI rates have also influenced expectations about inflation trends. Yet at the same time, we also highlight the beginning of the earnings season, which may shift market attention toward US stock markets

Across the Atlantic, our worries for Eurozone’s economic outlook tend to remain and we note that the slowdown of September’s HICP rate was confirmed earlier today, while recent PPI rates continue to highlight weakening price pressures in the region. On a technical level, EUR/USD edged higher yesterday, clearly now shifting the direction of the pair from sideways to upwards, at least in the short term. We tend to maintain a bullish outlook for the pair as long as it remains above the upward trendline initiated on the 4th of October, yet for further confirmation of the bullish outlook we would require the pair to break the 1.0635 (R1) resistance line and aim for the 1.0735 (R2) resistance level. Should the sellers take over the direction of the pair, we may see EUR/USD breaking the prementioned 1.0515 (S1) support line and aim for the 1.0445 (S2) support level.

USD/JPY on the other hand remained in a sideways motion, between the 148.00 (S1) support line and the 150.10 (R1) resistance line, in an indication that the JPY was unable to benefit from USD’s weakness. We tend to maintain our bias for the pair to continue its sideways motion and also note that the RSI indicator remains near the reading of 50, implying a rather indecisive market, which in turn may allow the pair to continue its movement within the corridor formed by the R1 and the S1. Recent PPI rates have done little to shift sentiment, reinforcing the pair’s muted volatility. Should the bulls take over, we may see USD/JPY rising and breaking the 150.10 (R1) line and aiming for the 150.90 (R2) resistance base, a level that marks an over 20-year high point for the pair. Should the bears take over, we may see the pair breaking the lower boundary of its current sideways motion, namely the 148.00 (S1) support line and aim for the 146.10 (S2) nest.

その他の注目材料

Today in the European session, we note the release of Germany’s final HICP Rate for September. On the monetary front, we note that Fed Board Governor Bowman, Fed Board Governor Waller, Atlanta Fed President Bostic and Boston Fed President Collins are scheduled to make statements, which may touch upon recent PPI rates and their implications for inflation. During tomorrow’s Asian session, we get from Japan the Corporate Goods Prices and Machinery Order growth rates for September.