Daily thread to exchange ideas and to share your thoughts
Give me an I. Give me an N. Give me an F. Well, you know where this is going.
Whether it be due to base effects and perhaps even transitory, the Fed will have its tolerance tested by the market in the coming months if inflation data continues to run hot as we saw with the US CPI print yesterday.
Treasury yields spiked higher and that gave the dollar a solid tailwind after days of meandering leading up to the release. Even Clarida doesn't seem too assured now.
As such, expect the market to keep a keen focus on anything inflation-related from hereon. Today's US PPI data will be yet another focus point in that regard.
If the market continues to keep in this headspace, that could lift yen pairs relatively higher and CAD/JPY continues to keep with that run on a break above 90.00 to target resistance closer to 91.50-63 next. The loonie is still among one of the more favoured plays at the moment in my view with dip buying very much warranted.
The pullback in dollar pairs sort of hints at a reset for the moment, with traders likely having to wait on Treasury yields for confirmation of where this is all heading.
As for equities, don't count out dip buyers but I reckon the bleeding may not be over just yet as technicals are being threatened in the Nasdaq. That could have broader spillovers to the risk mood in general if sellers continue to stick with that.
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