The USD has been the strongest mover today as it looked to fly up the charts on the back of global uncertainty and on the back of positive economic data. PPI data m/m was above expectations of 0.2%, coming in strongly at 0.3%. This helped push the Y/Y on figure to 2.8% (2.6% exp), which shows that despite the turmoil there is still some economic strength in the dollar. The USD bulls will now be focused on tomorrows CPI reading which will carry a lot of weight with the market, as bulls will be hoping for a hawkish signal in the form of a better than expected reading. Anything below expectations could lead to a potentially dovish stance and the risk of a rate cut coming off the table – if it was to signal a long term slow down for inflation. Despite all of this the USD is the big mover and tomorrow will certainly be another big day for it.
Looking at the USDJPY, it has been for me the big mover, and has finally gained some strong traction after a few weeks of toying with the idea. The push up to resistance at 112.033 for me is a strong bullish signal and I will be looking to see if it can make the next extension of 112.862. If the bears are to make a swipe and come back into a bullish market then support at 111.083 will be their first target in the short term. Below this there is a potential trend line as well that markets could potentially be focused on to defend, but it has already come under some pressure and we could see an extension down to the next level of support at 109.986. So for the USDJPY bulls they will be keenly focused on the upside of any positive CPI reading ahead of tomorrow and the potential to move higher.
The other big mover which will come as a surprise for many has been oil markets as they took a dive today even though the drawdown from US stockpiles was -12.63 Million barrels (3.29M exp). This sharp dive can be attributed to the strong USD, but also a build up in distilled products as well, showing that it’s not all one sided as analysts thought. But also weighing into this has been commodities come under some serious pressure today, and it will be interesting to see if it carries over into tomorrow as well.
On the charts Oil has so far fallen sharply and hit the 20 day moving average with support from 69.38 before making a stop. If the bears are keen for another swipe tomorrow I would expect a push down to the next level at 67.45 and with the potential to even test the long term bullish trend line. If this was to break it would be quite the bearish signal. If the bulls do come back into the market then a push to resistance at 71.28 and 72.50 is on the cards as well.