USD Broadly In Demand, NZD Hit Hard By CPI

 | Oct 23, 2014 05:03AM ET

Market Brief

The USD is broadly in demand after the Ottawa attack yesterday, the DXY index advances to 1-week high. Released yesterday, the US September CPI has been marginally better than the market estimates. Both the CPI and the core CPI remained unchanged at 1.7% on year to September (vs. 1.6% & 1.7% exp. respectively). The soft advance in consumer price gives time to Fed before its first fund rate hike. The US 10-Year yields recovered to 2.24% in New York, yet failed to move higher. The uncertainties on monetary policy will likely keep the US rates subdued for some more time.

Wednesday has been an event-full day for Canada. The Ottawa attack combined to BoC verdict lifted up the volatilities in CAD-complex. The BoC maintained the bank rate unchanged at 1.0% in line with expectations, yet stepped away from its “neutral” stance and the use of “forward guidance” to our surprise. The signs of cool-off in September CPI and the low oil prices were rather proper for a dovish tone. USD/CAD spiked down to 1.1184 (over a week low), bids below 21-dma (1.1203) pushed the pair back to this week’s 1.12-1.13 range as the Ottawa attack and lower oil prices offset the BoC verdict. USD/CAD bias turns marginally negative; resistance zone is seen at 1.1296/1.1325 (week high / MACD pivot).

In Japan, the MoF data showed decreasing Japanese interest in foreign bonds on week to October 17th. Japanese investors were net short of 1’169.1 billion yen of foreign bonds (vs. + 796.0bn yen a week ago), foreign interest in Japan stocks decreased by an additional 412.6 billion yen. On broad based USD strength, USD/JPY advanced to 107.38. The bearish momentum slows, yet decent option barriers at 107.50+ challenge the upside attempts. We see consolidation towards the daily Ichimoku cloud cover (105.01/106.24). On EUR/JPY, the formation of tweezer bottom should trigger a minor bullish reversal if 135.44 (yesterday low) holds through the day.