STATE OF THE MARKETS
Dollar firmed ahead of inflation data. While US stocks closed mixed on Monday, with Dow (+0.76%) and S&P (+0.23%) recouped earlier losses as Nasdaq (-0.07%) edged lower; Dollar was on firmed bids ahead of inflation data on Tuesday that is expected transitory. Bonds were on bids, sending yields lower, with the 10Y benchmark closing at 1.33% as the Dollar index spiked above the 92.80 mark.
In the commodities market, crude regained the $70 handle, as US gulf coast production grappled to recover lost output in the wake of a new hurricane Nicholas that is developing. On another front, gold continues to be suppressed under the $1,800/oz as markets continue to delve on Feds tapering this December.
In the FX space, short and long term accounts seemed optimist as Swiss and Yen were back on offers as Dollar regained footing in the demand territories. The King seized the helm of demand in the medium term accounts from the Yen, while keeping Euro, Swiss, Loonie and Aussie in the supply territories. US inflation data will be on closed watch Tuesday.
OUR PICK – NZD/USD
Fading optimism on downtrend channel. The risk sensitive Kiwi is facing a headwind recently as optimism fades in the light of a new delta variant that saw New Zealand (NZ) back in lockdown state. The NZ Institute of Economic Research (NZIER) forecasted a bleaker economic outlook towards year end though expect a rebound from 2022. From technical perspective, the pair is at the top of downtrend channel and specifically at the 61.8% retracement of May high to August low. We favor short with 0.7160 stop for the short and medium term, inline with our G8 FX sentiments model.
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