Trading plan for 17/10/2017:
At night we saw transient reactions after CPI from New Zealand and RBA minutes, but overall the Asian session went into a sleepy atmosphere. The stock market maintains a positive sentiment, which indirectly weakens the gold.However, the value of USD on the market remains modest. EUR/USD drops below 1.1770 and USD/JPY is at 112.15, although at night it was already 112.30.
On Tuesday 17th of October, the event calendar is quite busy with important news releases. The UK will post Consumer Price Index data, Germany will post ZEW sentiment data and the Eurozone will post Consumer Price Index data. During the US session, the US will release Import Price Index data, Industrial Production data, and Capacity Utilization Rate data. Some speeches are scheduled as well: first to speak will be BOE Governor Mark Carney and MPC Member Silvana Tenreyro, then FOMC Member Patrick T. Harker and BOC Senior Deputy Governor Carolyn Wilkins.
GBP/USD analysis for 17/10/2017:
The headline CPI data from the UK were released at the level of 0.3% (3.0% on yearly basis), which was in line with expectations. Slightly worse was PPI Input ( 0.4% vs. 1.2%, 2.4% prior), but PPI Output was unchanged at the level of 0.2% (0.4% prior). Nevertheless, the Retail Price index was much worse than expected as it was released at the level of 0.1%, while market participants expected a lower drop to 0.3% after 0.7% advance a month ago. In conclusion, the inflationary pressures were worse than expected in the UK, although at 3%, September's UK inflation rate is the highest it has been in five years and will continue to test the patience of the hawks at the Bank of England. But the key question is how much of this spike is domestically-generated? The latest headline figures were boosted by a 2.1% pick-up in fuel costs as pump prices respond to the recent increase in oil prices. Food prices, which are highly influenced by import costs, increased sharply by 0.8% on the month. Nevertheless, it is clear that the impact of the pound's post-Brexit plunge is still very much at play so it is quite possible the BoE will decide to hike the interest rate at the November meeting.
Let's now take a look at the GBP/USD technical picture at the H4 time frame. The market has tested the broken golden trend line from below at the level of 1.3342 and reversed back towards the technical support at the level of 1.3220. The market conditions are overbought and there is a clear bearish divergence between the price and the momentum indicator, which suggest the decline might extend towards the next technical support at the level of 1.3154 and 1.3111.
Market Snapshot: USD/JPY breaks above the trend line
The price of USD/JPY has broken above the short-term black trend line after a bounce from the level of 111.75. The bulls have managed to test the level of 112.30, but no decisive breakout was made yet. The oversold market conditions indicate a stronger rally towards the old high might happen anytime soon.
Market Snapshot: Gold fails at 50% Fibo
The price of Gold has failed to break out above the 50% Fibo at the level of $1,308 and after touching 200 periods moving average it reversed towards the old technical support at the level of $1,289. The bearish divergence is still is play as the market conditions are still overbought. The next important technical support is seen at the level of $1,278.
