USDJPY tracks upbeat yields to print four-day run-up on US inflation day

Traders remain cautiously optimistic while waiting for the US CPI on early Wednesday, especially amid recent downbeat signals of inflation.

Adding strength to the mildly positive risk profile could be the US policymakers’ hopes of avoiding the debt ceiling expiry despite failing in the first attempt.

Elsewhere, softer US sentiment figures supersede the hawkish Fed signals to weigh on the US Dollar even as the Treasury bond yields grind higher.

While the softer USD and slightly upbeat sentiment joined firmer yields to allow the USDJPY pair to remain firmer, AUDUSD and NZDUSD print mild upside while leading the G10 gainers versus the US Dollar. Further, EURUSD and GBPUSD also edge higher whereas Gold and crude oil print mild losses at the latest.

Cryptocurrencies remain depressed and fail to cheer the downbeat US Dollar amid traders’ fears of higher rates and regulatory challenges to the BTCUSD and ETHUSD.

Following are the latest moves of the key assets:

• Brent oil prints the first daily loss in five near $76.90 by the press time.
• Gold price drops to $2,030 while snapping two-day uptrend.
• USD Index remains depressed near 101.55, marking the first daily loss in three at the latest.
• Wall Street closed with mild losses but the Asia-Pacific shares edge higher. That said, equities in Europe and the UK trade mixed during the initial hour of trading.
• BTCUSD and ETHUSD drop for the fifth consecutive day to $27,600 and $1,850 as we write.

Cautious optimism prevails despite failed debt ceiling talks

Although the US policymakers failed to avoid the default fears in their first attempt, markets seem to have already priced in the moves and rather concentrate on the readiness for further talks to tame the disappointment. It should be noted that an absence of major negatives on the banking front joins an upbeat earnings season to keep traders slightly optimistic.

Further, hawkish RBA and RBNZ concerns, despite recently mixed data, join upbeat comments from the ECB and BoE officials to defend the respective currencies versus the US Dollar. The US Dollar’s latest weakness could also be linked to the mixed NFP details and the Fed’s dovish hike.

That said, doubts about China’s economic rebound, especially after recently downbeat PMIs, join fears of a global banking rout and recession to put a floor under the US Dollar prices amid upbeat yields.

On a different page, fears of Ethereum selling pressure and Bitcoin’s sturdy move despite the supply crunch flag fears of the cryptocurrency traders.

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

US CPI is the key

Having witnessed downbeat US Nonfarm Payrolls (NFP), as well as a dovish Fed hike, market players brace for the US central bank’s policy pivot and hence today’s US Consumer Price Index (CPI) for April becomes crucial for immediate directions. Apart from that, talks about the US debt ceiling expiration and the banking woes may also entertain traders amid a light calendar elsewhere.

May the trading luck be with you!