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Dollar soars broadly in early US session after stronger than expected consumer inflation reading. Futures tumble while 10-year yield is back pressing 4% handle. Nonetheless, the greenback is overwhelmed by Pound on rumors that UK Prime Minister Liz Truss is going to further backtrack on the mini-budget. The eventual near term fate of Sterling will still depend on the extent Truss is retreating. Australian Dollar is leading commodity currencies lower, followed by Euro and Swiss Franc. Yen is steady overall, except versus Dollar of course.

Technically, 10-year yield is resuming recent up trend. A big question is whether it could stay firm above 4% handle and close the week above there. If that happens, there is prospect of further upside acceleration until FOMC rate decision and release of new economic projection in early November. 61.8% projection of 2.525 to 3.992 from 3.568 at 4.474 is a bit far. But never say never.

In Europe, at the time of writing, FTSE is down -1.40%. DAX is down -0.71%. CAC is down -1.32%. Germany 10-year yield is up 0.079 at 2.391. Earlier in Asia, Nikkei dropped -0.60%. Hong Kong HSI dropped -1.87%. China Shanghai SSE dropped -0.30%. Singapore Strait Times dropped -1.39%. Japan 10-year JGB yield dropped -0.0034 to 0.251.

US CPI slowed to 8.2% yoy in Sep, but core CPI rose to 6.6% yoy

US CPI rose 0.4% mom in September, above expectation of 0.2% mom. Core CPI (all item less food and energy) rose 0.6% mom, above expectation of 0.5% mom. Energy index dropped -2.1% mom, with gasoline down 4.9%. Food index rose 0.8% mom.

For the 12 months ending September, CPI slowed from 8.3% yoy to 8.2% yoy, above expectation of 8.1% yoy. Core CPI, on the other hand, accelerated from 6.3% yoy to 6.6% yoy, above expectation of 6.5% yoy. Energy index slowed from 23.8% yoy to 19.8% yoy. Food index was up 11.2% yoy.

US initial jobless claims rose to 228k, slightly above expectations

US initial jobless claims rose 9k to 228k in the week ending October 8, slightly above expectation of 225k. Four-week moving average of initial claims rose 5k to 212k.

Continuing claims rose 3k to 1368k in the week ending October 1. Four-week moving average of continuing claims dropped -8k to 1364k.

Mid-Day

Daily Pivots: (S1) 0.6242; (P) 0.6271; (R1) 0.6305; More...

AUD/USD's decline extends today and intraday bias remains on the downside. Next target is 100% projection of 0.7660 to 0.6680 from 0.7135 at 0.6155. Firm break there will pave the way to 0.5781. On the upside, above 0.6345 minor resistance will turn intraday bias neutral first. But outlook will stay bearish as long as 0.6539 resistance holds.

In the bigger picture, down trend form 0.8006 (2021 high) is expected to continue as long as 0.6680 support turned resistance holds. Next target is 0.5506 low. Medium term momentum will now be closely monitored to gauge the chance of break of 0.5506.

Economic Indicators Update

US initial jobless claims rose 9k to 228k in the week ending October 8, slightly above expectation of 225k. Four-week moving average of initial claims rose 5k to 212k.

Continuing claims rose 3k to 1368k in the week ending October 1. Four-week moving average of continuing claims dropped -8k to 1364k.

Full release here.

US CPI rose 0.4% mom in September, above expectation of 0.2% mom. Core CPI (all item less food and energy) rose 0.6% mom, above expectation of 0.5% mom. Energy index dropped -2.1% mom, with gasoline down 4.9%. Food index rose 0.8% mom.

For the 12 months ending September, CPI slowed from 8.3% yoy to 8.2% yoy, above expectation of 8.1% yoy. Core CPI, on the other hand, accelerated from 6.3% yoy to 6.6% yoy, above expectation of 6.5% yoy. Energy index slowed from 23.8% yoy to 19.8% yoy. Food index was up 11.2% yoy.

Full release here.

Cable is consolidating above two important supports at 1.1053/50 (Fibo 38.2% of 1.0348/1.1490 / psychological) following a short-lived dip below these levels and a quick rebound on Wednesday.

Near-term sentiment is mixed, as the Bank of England’s emergency bond buying program is scheduled to end on Friday, but the central bank signaled it could extend purchases if market conditions demand it.

On the other side, data released on Wednesday showed that Britain’s economy unexpectedly contracted in August, but economists still expect the BoE to continue to raise interest rates, in fighting the red-hot inflation, with wide expectations for 0.75% hike and 1% raise also being on the table.

Mixed fundamentals are complemented by conflicting daily studies, daily MA’s are in bearish setup but positive momentum is rising, with potential bear-trap under 1.10 to offer additional support.

Traders focus on today’s release of the US inflation data for September, which are expected to provide fresh direction signal.

According to forecasts, US consumer prices are expected to ease to 8.1% in September from 8.3% month, with release at / below consensus likely to cool expectations for very aggressive Fed in Nov 2 policy meeting and deflate dollar that would be supportive for sterling.

In such scenario, cable needs to rise and close above 1.1140 (20DMA / Fibo 38.2% of 1.1490/1.0922), to boost existing positive signal from Wednesday’s bullish engulfing pattern.

Conversely, pound would come under fresh pressure on higher than expected inflation figure and risk renewed probe below 1.10 zone that would signal continuation of a bear-leg from 1.15 double-top.

Res: 1.1139; 1.1209; 1.1276; 1.1360.
Sup: 1.1053; 1.1000; 1.0919; 1.0784.

AUDUSD has been in a steep downtrend since early March, generating a profound structure of lower highs and lower lows. Although the pair managed to find its feet and traded sideways during the past week, it soon broke the pattern to the downside to form a fresh 29-month low of 0.6234.

The short-term oscillators are endorsing this bearish near-term bias. Specifically, the RSI is hovering within its 30-oversold zone, while the MACD histogram has retreated further below its red signal line in the negative territory.

Should selling pressures intensify, the pair could initially challenge the 29-month low of 0.6234. Dipping beneath that region, the price would descend towards its pandemic lows, where the April 2020 support could act as the next downside barrier. Failing to halt there, the spotlight may turn to the crucial psychological mark of 0.6000.

On the flipside, bullish actions could propel the price towards its recent support region of 0.6362, which might now act as resistance. Conquering this barricade, the bulls could then aim for 0.6546, with the latter being the upper boundary of its recent sideways pattern. If this barricade fails, the price may edge higher to test the July low of 0.6680.

Overall, even though AUDUSD has come under tremendous downside pressure, the momentum indicators currently suggest that the market has reached oversold levels. Therefore, an upside correction could be on the cards.

• GBPAUD reversed from resistance zone
• Likely to fall to support level 1.7400

GBPAUD currency pair recently reversed down from the resistance zone lying between the strong resistance level 1.7650 (which has been reversing the pair from July) and the upper daily Bollinger Band.

The downward reversal from this resistance zone is aligned with the active short-term impulse waves (iii) and 3.

Given the clear daily downtrend, GBPAUD can be expected to fall further toward the next support level 1.7400.

• Silver reversed from resistance area
• Likely to fall to support level 18.20

Silver recently reversed down from the resistance area located between the key multi-month resistance level 21.00 (which has been reversing the price from June) and the upper daily Bollinger Band.

This resistance area was further strengthened by the 38.2% Fibonacci correction of the earlier downward impulse from April.

Given the strong daily downtrend, Silver can be expected to fall further toward the next support level 18.20 (which has been reversing the pair from July).

USDJPY is coming higher, making an extension as expected within an impulsive recovery that may not be over yet as US yeilds are still trading below September highs. When this one breaks, recovery on USDJPY may resume, especially if dollar will stay in bullish mode after the US CPI report later today. Any intraday pullback on USDJPY can stop at 145.90, that was the previous swing high.

From a more mid-term perspective, keep in mind that this run up on USDJPY is the final leg of a higher degree trend that can stop at 148.00 area; it was resistance back from 1998. Also, we see hear warnings from Japanese policymakers against investors selling off the Japanese currency, raising speculation about the second round of intervention.

WTI crude oil futures found strong resistance near the medium-term descending trend line at 93.70, sliding towards the 50-day simple moving average (SMA) in the aftermath. The MACD oscillator is still standing above its trigger and zero lines; however, the stochastic is diving towards the oversold territory, suggesting more losses in the market.

Should prices decline further, immediate support could be found around the 20-day SMA at 84.40. Then, a leg below that level could meet the eight-month trough of 76.25, before the focus shifts to 65.90, registered in December 2021.

However, if the market manages to regain positive momentum, the strong obstacle of 93.70, which coincides with the downtrend line, could offer nearby resistance ahead of the 200-day SMA at 97.14 and the 97.82 barrier. A significant close above the latter could raise chances for more increases.

In the medium-term, the outlook remains negative since the price holds below the downtrend line and the 200-day SMA. Only a close above those boundaries will switch the outlook to positive. 

GBPJPY seems to be forming a global corrective trend, taking the form of a double zigzag. On the 1H timeframe, the final part of this trend is visible - the actionary wave y of the cycle degree.

It seems that the wave y takes the form of a triple zigzag Ⓦ-Ⓧ-Ⓨ-Ⓧ-Ⓩ of the primary degree, which may soon be fully completed. After the end of the second intervening wave Ⓧ, which took the form of a triple combination, the price began to move up.

Most likely, the wave Ⓩ takes the form of a double zigzag, in which the first two parts look finished. In the next coming trading weeks, growth is expected within the final intermediate wave (Y).

The completion of the entire wave Ⓩ is possible at 176.25. At that level, wave Ⓩ will be at 76.4% of wave Ⓨ.

In the second variant, the market builds not a double, but a triple zigzag w-x-y-x-z of the cycle degree. And now its fourth part is being formed.

Thus, in the last section of the chart, we see a corrective movement in the cycle wave x. This wave, judging by its structure, may take the form of a triple zigzag Ⓦ-Ⓧ-Ⓨ-Ⓧ-Ⓩ.

It is possible that the market will fall in the last wave Ⓩ to 146.46. At that level, cycle wave x will be at 50% along the Fibonacci lines of actionary wave y.