• USD/JPY remains muted after the previous day’s slump on Wednesday.
  • Lower US Treasury yields undermine the demand for the US dollar.
  • US Dollar Index recovers from the daily lows toward 92.70.

After testing the weekly lows in the American session, USD/JPY manages to push above 109.70 in a 20-pip movement. The disappointing US Consumer Price Index (CPI)  induced broad-based USD selling pressured the USD/JPY near the higher levels. At the time of writing, USD/JPY is trading at 109.70, up 0.01% for the day.

The USD/JPY pair fell from the high of 110.16 on Tuesday following the sell-off in the greenback. The US Dollar Index (DXY), which tracks the performance of the buck against the basket of six major currencies retreated from the high of 92.66 to the test low of 92.29 before staging an advance back to the 92.60 level.

The US benchmark Treasury yields retreated on Tuesday after inflation data showed a slightly smaller-than-expected rise in prices. The yield on the 10-year Treasury bond fell 4.7 basis points to 1.277% before recovering towards 1.28%.

The CPI data came at 5.3% in August on a yearly basis slightly below the market expectations of 5.4%. Investors assessed the readings as a signal that Fed would not raise the interest rate any sooner.

On the other hand, the Japanese Yen gains on its safe-haven appeal as the optimism induced after the report that Japan is on track to reach the vaccination levels of the US and Europe.

As for now, traders are waiting for the Japanese Machine Orders, US Trade data, and Industrial Production data to gauge the market sentiment.

USD/JPY additional levels

 

  • USD/CAD edges higher after rising the most in a week.
  • US dollar jumped across the board following the lowest CPI print since January.
  • WTI struggles near six-week top despite price-positive inventories.
  • Canada elections, CPI and US second-tier data eyed.

USD/CAD buyers pause 1.2690 amid Wednesday’s Asian session, following the heaviest daily jump in a week.

The US dollar strength dominated over slightly upbeat oil prices to propel the Loonie pair buyers the previous day. However, the pair’s latest inaction could be linked to the cautious mood ahead of Canada’s key Consumer Price Index (CPI) data for August.

The US Dollar Index (DXY) bounced off a one-week low to regain 92.60-65 levels following the US CPI data release for August. With the headline inflation figures easing to the lowest since January on MoM, the greenback jumped on concerns that the Fed hawks have a reason to back the tapering chatters when they meet in the next week.

Also fueling the US dollar’s safe-haven demand were the fears of the coronavirus and Canadian election.

On the contrary, WTI oil remains fail to rise past August 03 levels even as the industry inventories shrank more than expected. That said, the weekly reading of the American Petroleum Institute (API) Crude Oil Stocks dropped below -2.882M prior to -5.437M during the week ended on September 10. While the US dollar strength weighed on the oil prices, energy traders may now await the official inventories from the Energy Information Administration (EIA), prior -1.529M, for fresh impulse.

Amid these plays, US stocks closed lower while the Treasury yields also dropped the most in a month on Tuesday.

Looking forward, USD/CAD traders will pay attention to Canadian politics amid challenges for the current government ahead of the snap elections. Also important will be the oil fundamentals and risk catalysts. Above all, Canada CPI for August, expected 0.1% versus 0.6% MoM prior, coupled with the BOC CPI Core that is likely to ease from 0.6% to 0.2%. Given the Bank of Canada (BOC) policymakers’ latest cautious mood, today’s Canada inflation numbers will be the key.

Technical analysis

Sustained trading beyond 200-day EMA, around 1.2605 enables USD/CAD bulls to aim for July tops surrounding 1.2810.

 

  • Silver edges higher after snapping two-day downtrend, bouncing off monthly low.
  • Sluggish Momentum line, multiple hurdles to the north challenge bulls.
  • Five-week-old previous support adds to the upside filters, monthly horizontal support lures sellers.

Silver (XAG/USD) buyers attack one-week-old resistance, following the first daily positive closing in three. That said, the quote grinds higher around $23.85 during early Wednesday’s Asian session.

Despite bouncing off the lowest levels since late August, silver buyers lack firmer Momentum back-up to overcome the immediate hurdle around $24.00.

Even if the quote manages to cross the $24.00 mark, the support-turned-resistance line stretched from early August, near $24.20 will challenge the XAG/USD bulls. Also acting as an upside barrier is the monthly top of $24.86.

Meanwhile, pullback moves could aim for the weekly low, also the lowest level for September, near $23.35.

Following that, a horizontal area comprising multiple lows marked since August 12, near $23.00, will be in focus as it holds the key to the metal’s anticipated slump towards the yearly low of $22.16.

Silver: Four-hour chart

Trend: Pullback expected

 

  • GBP/USD dropped the most in a week after refreshing five-week high, edges lower of late.
  • UK Claimant Count Change eases lesser than expected, Unemployment Rate matches forecast.
  • US CPI m/m drops the most since January, US dollar rallied as tapering fears grew firmer.
  • BOE hawks seek firmer inflation after mixed jobs report, risk catalysts are important too.

GBP/USD bears take a breather around 1.3800 to kick-start Wednesday’s Asian session following a volatile day that refreshed monthly high, before marking the heaviest daily fall in five weeks.

The cable cheered the broad US dollar weakness ahead of the US Consumer Price Index (CPI) data before the market’s rush to risk-safety bolstered the greenback. It’s worth noting that the quote fails to respond much to the latest UK employment figures.

UK job numbers came in mixed with the Unemployment Rate matching the expected weakness to 4.6% during the three months to July versus 4.7% prior. However, the Claimant Count Change came in a bit higher than the forecast of -71.7K to -58.6K in August versus -7.8K previous readouts. Further, Average Earnings Excluding Bonus matched the softer forecast of 6.8% for 3M/yr July period but inched above 8.2% market consensus of 8.2% to 8.3%, compared to 8.8% prior, while including the bonus component.

On the other hand, the US CPI dropped the most since January on monthly basis to 0.3% versus 0.4% expected and 0.5% prior. The CPI ex Food & Energy also dropped below 0.3% expected and previous readings to 0.1% during August, marking the biggest fall in six months.

As the UK employment figures aren’t so sour, hawks among the Bank of England (BOE) policymakers have got a chance to reiterate the bullish bias as the British government is up for booster shots and one vaccine dose to 12-15-year-olds, not to forget easing travel rules for winter. Even so, fears of a third covid wave in the UK and another lockdown challenge the GBP/USD bulls as the death toll rose to 185 while the daily infections eased to 26,628.

Elsewhere, Brexit drama stretches as Britain delays full post-Brexit border checks from the European Union (EU). “The UK is to delay introducing post-Brexit checks on food and farming imports to England, Scotland and Wales, blaming Covid disruption and pressure on global supply chains,” said the BBC. Fears of the EU-UK tussles also escalate after the “BOE Governor Andrew Bailey issued a fresh broadside over the European Union’s post-Brexit plans on clearinghouses, warning any upheaval risked a “real threat” to financial stability,” per Bloomberg.

It’s worth noting that the sour sentiment in the market, recently backed by the Fed tapering concerns weighs on equities and underpin the US dollar’s safe-haven demand, adding weakness to the GBP/USD prices ahead of the key inflation data.

Hence, today’s UK CPI data will be important to watch given the latest chatters over the winding up of the Quantitative Easing (QE) by the BOE’s Husher, also previously backed by the other policymakers. That said, the headline CPI is likely to jump from 2.0% to 2.9% YoY and may help the BOE hawks to reiterate their bullish bias, which in turn could favor the GBP/USD prices in recovering the latest losses.

Technical analysis

Having reversed from 100-DMA, near 1.3915, GBP/USD sellers aim for a three-week-old rising support line near 1.3765.