News and Analysis

EUR/USD looks oversold as the US dollar rally loses momentum. With hot CPI expectations potentially priced in, could inflation trigger a dollar pullback?

US small caps have lost nearly 9% since August, with surging Treasury yields overwhelming a historically favourable midterm trading period. Now the Russell 2000 is threatening to break a major support zone ahead of US CPI.

The Aussie is coiling beneath 0.7000 ahead of US CPI, with its relationship with US front-end yields strengthening sharply just as markets question whether the Fed will need to hike again this month.

USD/CAD shows signs of exhaustion while GBP/CAD retains a bullish structure, providing clues for a potential GBP/USD rebound ahead of US CPI.

Despite Bitcoin's attempt to regain ground during the latest trading session, posting gains of more than 1.6%, the move has yet to signal a meaningful recovery in demand. The main reason is that, over recent weeks, price action has continued to develop within a broader phase of indecision, preventing BTC from reclaiming the key psychological barrier around $85,000 in a convincing manner.

A 0.6% m/m reading in headline CPI, while scary at first glance, is already expected and presumably discounted into the current market prices. Instead, the “core” reading will be more impactful for the Fed and markets - see what it means for the US dollar!

USD/JPY is trading in a narrow range beneath major resistance ahead of CPI, with the next breakout likely to set the near-term directional tone.

The trading week continues to unfold and, for now, USD/CAD remains trapped in a relatively consistent phase of indecision. The Canadian dollar has managed to hold on to some of its recent strength, which can be seen in the pair's performance over the last two sessions, where it has declined by roughly 0.2%.

The USD/JPY eased lower today with the greenback also declining against several other currencies. However, at the time of writing, oil prices were bouncing back and yields were off their lows again. The US dollar hadn’t moved much yet, but these forces could help it to regain its poise ahead of the release of US CPI on Wednesday.

GBP/USD is compressing into a tight near-term range just above key support, with a breakout likely to provide the next directional cue.

U.S. stocks are mixed ahead of the open on Tuesday, with tech stocks leading the decline as investors also weigh bank earnings.

Amid a lack of any major news, the FX markets have been largely in consolidation mode in the first half of Tuesday’s session. The US dollar eased along with bond yields and oil prices, allowing downbeat currencies like the euro to rebound modestly. With US CPI data due for release on Wednesday, don’t expect much in the way of a sharper decline in USD ahead of it. If anything, we could see the dollar buying resume, especially if crude oil prices catch a bid again amid the ongoing situation.