AUD Rebounds Overnight, CPI Data Key Today

The AUDUSD rallied overnight as losses related to China concerns reversed and the USD softened on disappointing economic data. AUDUSD rose above 0.64 before settling just below and is now trading at 0.6394.

• DXY is down 1.1% from its intraday peak and all of the G10 were higher versus the USD on the day. AUD was the third best performer after SEK and GBP.
• AUDUSD broke through its 20-day EMA of 0.6384 but the October 24 high of 0.6411 provided resistance. It remains the initial resistance level and a confident break above this is needed for the reversal of the bearish theme.
• Equity markets were broadly stronger, except for the FTSE, with both the S&P500 and Eurostoxx up 1.6%. Volatility trended down during the session with the VIX finishing at 28.46%.
• Oil prices remained range bound with WTI +0.5% but Brent -0.3% as demand concerns persisted but the weaker dollar provided price support. Copper prices fell 0.8% on worries regarding Chinese demand but LME inventories fell to their lowest since April pointing to a tight market. Aluminium rose on fears of sanctions on Russian output. Iron ore is trading below $90.
• The focus today will be Q3 CPI, which is expected to rise 1.6%q/q and 7%y/y, and the trimmed mean by 1.5%q/q and 5.5%y/y. The monthly CPI series is expected to increase 7.1%y/y in September. See our CPI Preview.