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USD Consolidates Post CPI Advance, JPY Remains Strongest In G10

FOREX
  • Despite a marginal pullback from yesterday’s highs, the USD index has consolidated on Wednesday as markets paused for breath following the prior session’s heightened volatility post-CPI.
  • Greenback losses are largely as a result of the substantial pullback for USDJPY overnight, amid the Bank of Japan sharpening their tone surrounding the potential to intervene in FX markets. The Bank were said to be 'checking rates', a tacit warning that levels of tolerance are being approached and that the next step could be the formal selling of foreign currencies.
  • USDJPY came within three pips of the 144.99 cycle highs during APAC trade before a significant reversal to session lows of 142.55. Further potential weakness would turn the focus to initial firm support which has been defined at 141.51, the Sep 9 low, while strong support also lies at 140.21, the 20-day EMA.
  • GBP also showed some relative outperformance on Wednesday after higher than expected core CPI is likely to remain a concern ahead of the Sep 22 central bank decision. EURGBP continues to edge further away from key double top resistance at 0.8721/22, an important bull trigger. On the downside, initial firm support is unchanged at 0.8567, the Sep 6 low.
  • In emerging markets, the HUF came under pressure (EURHUF down 1.45%) as the EU’s executive arm plans to recommend cutting funding for PM Orban’s administration on concerns about widespread graft in Hungary, according to senior EU officials.
  • New Zealand GDP and Australian Employment Data are highlights for Thursday’s APAC session. In the US, focus turns to the August retail sales report and the release of both Empire State & Philly Fed Manufacturing Index data.
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