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Denis Sergienko • 2022-09-13

US dollar bears hold control ahead of all-important inflation

US dollar bears hold control ahead of all-important inflation

Hopes of witnessing softer US inflation keep weighing on the US dollar as traders await the key Consumer Price Index (CPI) data on Tuesday. Adding to the cautious optimism were expectations of more stimulus from the top-tier economies like the US, the UK, China and Europe.

With this, the USD Index dropped for the third consecutive day to renew a fortnight low, which in turn favored other currencies and commodities.

On the top, a pullback in the Treasury bond yields from the multi-day high adds strength to the USDJPY pair’s downside move while GBPUSD cheers softer Unemployment Rate to remain on the frontline.

Gold price struggles to extend the bullish bias amid anxiety ahead of the important data while crude oil led the bulls amid mixed concerns surrounding the demand-supply gap.

Cryptocurrencies were pressured amid fears of more regulations and doubts over Ethereum’s Merge ahead of the anticipated release on Thursday.

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Following are the latest moves of the key assets:

  • Brent oil rises for the fourth consecutive day, up 0.55% intraday near $95.60.
  • Gold remains indecisive around $1,725 after two-day rebound.
  • USD Index drops for the third consecutive day to a two-week low near 108.00.
  • DAX and Eurostoxx both print mild gains while FTSE rise 0.30% intraday at the latest.
  • Wall Street marked another positive day with Nasdaq’s unruly advantage.
  • BTCUSD prints the first daily loss in seven while reversing from one-month high, down 0.45% intraday near $22,300 at the latest. Further, ETHUSD struggles around weekly lows during the third negative day close to $1,700.

China’s return fails to entertain traders

The expectations that the People’s Bank of China (PBOC) will keep the monetary policy intact and the Chinese government will announce more measures to combat recession fears should have favored the market sentiment but could not entertain the bulls much. The reason might be linked to the escalating tussles between Washington and Beijing, as well as the hawkish bias of the major central bankers ex-Japan and China.

Additionally, the fears that Russia may retaliate strongly after retreating from Ukraine to join talks that the US-Iran oil deal is too far and may not help the West to overcome the energy crisis.

Amid these plays, the DXY seems to prepare for the next week’s Fed meeting, as well as today’s US inflation data, which in turn favored the USDJPY bears the most, mainly due to the downbeat yields. GBPUSD occupies the number two position after surprise positive on the employment front, as well as chatters that UK PM Truss will pressure BOE towards aggressive rate hikes. EURUSD also remained firmer as Germany’s inflation data confirmed strong prints and justifies the hawkish ECBspeak.

Elsewhere, gold tried to cheer the US dollar weakness but fails to do so amid question marks over China and anxiety ahead of the key US data. Oil, on the other hand, led the bulls even as fears of delayed supply from Iran battles the chatters of higher output from the Permian.

Moving on, BTCUSD retreats from the monthly high while ETHUSD prints a three-day downtrend.

  • Strong buy: AUDUSD
  • Strong sell: ETHUSD
  • Buy: USD Index, USDCAD, Nasdaq, USDJPY
  • Sell: DAX, FTSE 100, gold, BTCUSD

All eyes are on the US CPI

Given the softer expectations from the US CPI data, any positive surprise won’t be taken lightly, which in turn could renew the US dollar demand. Also likely to recall the USD bulls are the geopolitical/trade fears surrounding China and Russia.

May the trading luck be with you!