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FOREX: Funding Currencies Bounce, Gold Surges

FOREX
  • EUR/CHF is softer, erasing yesterday's modest gains, with the cross finding resistance and failing to break higher on the approach toward the 50- and 200-dmas of 0.9588/0.9596. Importantly, these dmas have now formed a 'death cross' for the first time since May last year - signalling that short-term momentum is pointed lower, despite the recovery off the August low. 
  • Haven and funding currencies are favoured early Tuesday, aiding the outperformance in both JPY and CHF. USD/JPY faded toward overnight lows to trade either of the 146.50 level as markets eye the publication of two research papers from the Bank of Japan - writing in favour of inflation persistence in Japan, citing chronic labour shortages as being supportive of wages and a marked shift in corporate pricing strategies.
  • Separately, gold is well bid, with spot clearing $2,500/oz to hit new alltime highs. A volume surge on the way through $2,550/oz resistance helped support prices higher, with futures markets showing near 1,500 lots trade inside 60 seconds - cash equivalent of north of $380mln.
  • Canadian CPI numbers take focus Tuesday - providing one of the last major releases prior to the BoC's next decision on Sept 4th. It would likely take a particularly large upside surprise to see expectations of a pause but there could be greater sensitivity to the subsequent path, with the market looking for two additional 25bp cuts to follow in October and December.
  • Both Fed's Bostic and Barr are set to speak, however neither are expected to address monetary policy.
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