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UK annual headline inflation rate was confirmed at 4.2% (3.9% expected) while the Core CPI came in at 3.4% (3.0% expected). This helped to solidify the expectations that the BOE will raise the rates next month. There is a base effect in the annual number but this hasn’t stopped the traders from betting on a rate hike. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

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GBPUSDH8 1711 1

GBPUSD was driven higher this morning as the UK October CPI y/y came in better than expected (4.2% vs. 3.9%). Sterling rallied all the way up to 1.3472. The move was rejected but all in all, cable has been quite strong relative to the other dollar counterparts during this recent USD rally. Cable has been ranging between 1.3402 and 1.3472 while EURUSD has been hammered much lower. It shows the relative strength of the UK and EU economies and the fact that the traders still believe the BOE is more capable of hiking rates than the ECB which is stuck and can’t raise rates because of Italy. This range-bound activity is at the moment trying to force GBPUSD above the downtrend line we’ve been following. A break above the 1.3472 would confirm this and would open a way to the 50% retracement at 1.3524. A failure to penetrate the level would be likely to lead to a retest of the range low.

USOIL.spH8 1711

USOIL traded lower on the expectation that the Biden administration might seek to lower the gasoline prices by releasing oil from the emergency reserve. The bulls threw in the towel yesterday after the price couldn’t penetrate the SMA(20) at 80.64 (8h chart). This resulted in the price dropping over 2%. It’s been our view for some time that this market is creating a top after it rallied higher for several weeks. USOIL is making lower highs and the moving averages point lower with the faster SMA(20) below the slower SMA(50) in the 8h chart. Selling rallies has worked well and until this strategy stops working it makes sense to expect the line of least resistance to be on the downside. The key price levels for USOIL are 74.73, 77.58, 80.64, 83.57 and 84.96.


GOLD took some beating after the US consumer data came out yesterday. The price of gold dropped to a level where a channel low and the SMA(20) coincide. At the time of writing this, the bulls are trying to push the price higher again. However, such a steep price move lower is a bit bearish and could lead to further corrective moves in the current up-move. A break below the 1848.76 support or a lower high below 1877.09 would be a confirmation for this and could take the price back to 1834. On a decisive break above the latest high at 1877.09, a move towards the 1916.60 resistance level would be likely.

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Macro Drivers for the USD 

As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.

The Federal ReserveFed Chair Powell said on Friday (August 27th) in Jackson Hole Symposium that tapering could begin in 2021 but also voiced concerns about the spread of the delta variant. Now the Fed signals (September 22nd) that taper could start soon but hints that negative developments in the employment front could cause a further delay.
StimulusThe US lawmakers have authorised approximately five trillion dollars of economic stimulus since the beginning of the pandemic. Now, US lawmakers have agreed to a  $1.2 trillion infrastructure spending plan. The Fed officials consider ending the asset purchases in the middle of 2022. 
YieldsApart from the recent pickup (that started in August 2021), the Treasury yields have been moving lower since March 2021. All in all, the yields and interest rates are extremely low on both nominal and real basis. 
EmploymentPayrolls increased by 531K in October this exceeded the analyst expectation of 455K. September number was revised up to 312K.
InflationThe annual inflation rate for September as per PCE deflator was confirmed at 4.4% (headline) and 3.6 (core) which is the highest rate seen in 30 years.   

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 The Next Main Risk Events

  • EUR – ECB Financial Stability Review
  • CAD – CPI (+ common, median and trimmed CPI)
  • USD – FOMC Member Williams Speaks
  • USD – Crude Oil Inventories
  • USD – FOMC Member Evans Speaks

For more information and details see the TIOmarkets economic calendar here

 Market News & Facts 

  • US Retail Sales m/m 1.7% (1.3% expected)
  • US Core Retail Sales m/m 1.7 (1.0% expected)
  • US Industrial Production m/m 1.6% (0.9% expected)
  • RBA’s Lowe: No rate hike at 2.5% inflation  
  • Empire State Manufacturing Index 30.9 (22.1 expected)
  • US JOLTS Job Openings 10.44M (10.02M expected)
  • UK Prelim GDP q/q 1.3% (1.5% expected)
  • Australian Unemployment Rate 5.2% (4.8% expected)
  • Australian Employment Change -46.3K (50K expected)
  • US CPI 0.9% (0.6% expected)
  • China October CPI 1.5% (0.7% expected)
  • German ZEW Economic Sentiment 31.7 (20.3 expected)
  • BOE’s Bailey: Inflation related to reopening of the economies

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Trade Safe!

Janne Muta
Chief Market Analyst

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DISCLAIMER TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyzes and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with any legal requirements for financial analyzes and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval. FX and CFDs are leveraged products. They are not suitable for every investor, as they carry a high risk of losing your capital. Please ensure you fully understand the risks involved. All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated. 

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