USDJPY traders appear too cautious as US inflation, Japan #GDP loom

Traders are being cautious as they await the US inflation data for July, influenced by the US Federal Reserve's recent outlook. Mixed news from around the world and weaker UK inflation data are also holding back market momentum. The Reserve Bank of New Zealand’s unexpected rate cut has boosted some traders, while GBPUSD has fallen from its recent high due to the weak UK inflation data. The US Dollar fell sharply the previous day after weak Producer Price Index data and improved market risk.

The EURUSD is performing well due to the US Dollar’s weakness, but GBPUSD has dropped from a two-week high. USDJPY is stable within a week-long range as traders await Japan’s Q2 GDP data.

The NZDUSD has dropped the most since early July because of the Reserve Bank of New Zealand’s surprise rate cut. AUDUSD is uncertain due to less dovish signals from the Reserve Bank of Australia and worries about China's economy.

USDCAD is at a three-week low due to falling oil prices. Oil prices have recently dropped from a multi-day high due to rising US stockpiles. Gold remains cautious after a recent decline from a month-old resistance line.

In cryptocurrencies, BTCUSD and ETHUSD are fluctuating at weekly highs amid mixed signals from Donald Trump’s interview with Elon Musk.

Following are the latest moves of the key assets:

• WTI Crude oil lacks momentum near $78.80 after reversing from a three-week high the previous day.
• Gold remains sidelined near $2,470 after snapping a three-day uptrend on Tuesday.
• USD Index licks its wound at 102.60, the lowest level in more than a week after declining in the last three consecutive days.
• Wall Street closed in the green but the Asia-Pacific shares traded mixed. However, equities in Britain and Europe print mild gains during the initial trading hour.
• BTCUSD and ETHUSD both print mild gains by rising to $60,800 and $2,730 as we write.

US Dollar snaps three-day losing streak ahead of key data…

The US Dollar Index (DXY) is gaining slightly after falling for three days. This is due to the market being cautious ahead of the US Consumer Price Index (CPI) report. The DXY dropped significantly the previous day because of weak US Producer Price Index (PPI) data and easing concerns about the Middle East, along with expectations of a Federal Reserve rate cut in September.

In geopolitical news, US Secretary of State Antony Blinken has delayed his trip to the Middle East, and Iran is conducting military drills. Reports of explosions in Tel Aviv, Israel, have not resulted in casualties also add to the market’s jitters.

The market is mainly quiet except for notable moves in GBPUSD and NZDUSD as traders wait for US inflation data to confirm Fed expectations. GBPUSD has fallen slightly from a two-week high due to weaker UK inflation data, which supports predictions of a Bank of England rate cut. NZDUSD gained attention after the Reserve Bank of New Zealand unexpectedly cut its key rate, and further rate changes are anticipated.

EURUSD is strong and nearing a multi-month high, despite weaker ZEW sentiment figures. It is preparing for Eurozone employment and GDP data. USDJPY remains stable, with traders awaiting the US CPI report and Japan’s Q2 GDP data. Japan's Prime Minister announced he won't run for re-election, focusing on boosting wages and investment.

AUDUSD is showing minor losses as the market’s expectations of a Reserve Bank of Australia rate cut decrease. USDCAD has bounced back from a three-week low due to a stable US Dollar and a drop in crude oil prices. Crude oil prices fell after higher-than-expected stockpiles were reported, and there are fewer geopolitical concerns.

Gold prices also fell the previous day but stabilized as the market waits for US inflation data.

• Strong Bullish: USDCAD, USDJPY, US Dollar, Silver
• Strong Bearish: AUDUSD, NZDUSD, GBPUSD, GBPJPY
• Bullish: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Bearish: DAX, FTSE 100, EURUSD, Crude Oil

All eyes on US CPI but EU data can entertain EURUSD traders…

Today's focus is on the US CPI and Core CPI for July, which are crucial for market watchers. Additionally, the Eurozone’s Q2 Employment Change and GDP data will impact EURUSD volatility before the US inflation data is released.

If US inflation data is as expected, it may lead to the Fed being cautious about rate cuts, which could support the US Dollar. However, if there is a significant drop in inflation, the US Dollar might fall to a multi-month low.

Before the US data is out, concerns about a weakening EU economy and labor market could challenge EURUSD buyers and possibly reverse recent gains.

Other factors to watch include the US weekly oil inventory data, comments from the Fed, and any new risk news, which could affect market momentum.

May the trading luck be with you!