Hot US inflation fails to support dollar while USDJPY drops beneath moving averages

The greenback is extending its slide today even though this week's US CPI and PPI readings came in hot. Treasury yields are higher this morning as well, yet buyers are still hard to find for the dollar.

The gap between the inflation headlines and the dollar's path merits attention. Normally, firmer price data would support the currency by feeding expectations of tighter policy. The market has yet to see that macro narrative reflected in price action, though. Today the dollar is for the most part heading the other way.

The dollar is down versus six of the seven major currencies.

The New Zealand dollar sees the biggest US dollar decline, with the Australian dollar close behind. USDJPY is the outlier, up a touch on the day after backing away from earlier weekly highs.

Against the dollar:

• The US dollar is down around 0.82% against the NZD.
• The US dollar is down around 0.56% against the AUD.
• The US dollar is down around 0.50% against the CHF.
• The US dollar is down around 0.49% against the GBP.
• The US dollar is down around 0.34% against the EUR.
• The US dollar is down around 0.23% against the CAD.
• The US dollar is up around 0.02% against the JPY.

AUDUSD is climbing back from a weak Australian jobs report and the previous day's decline, with price now near 0.6958.

The bounce shows that the first market response to data is never the final one. Bears must add selling to hold their grip. When selling dries up and prices begin to recover, traders need to reconsider their positions.

Weak yen and inflation stay central for Ueda.

Bank of Japan Governor Kazuo Ueda said officials are tracking the yen's weakness as an inflation factor.

He added that the speed and timing of rate increases will depend on FX moves, AI-related demand and the Middle East. He sees economic and price trends as largely in line with BOJ projections and repeated that financial conditions remain accommodative.

A softer yen makes imports costlier and adds to domestic price pressure, keeping the currency central to BOJ policy and traders sensitive to further tightening signals.

USDJPY has slipped beneath its converging hourly moving averages.

The pair rallied earlier in the week but stopped short of the September 24 peak.

Buyers had the chance and could not crack that level. The subsequent retreat has pushed the pair back under the near-converged 100- and 200-hour moving averages near 158.23.

Near 158.01, that moving-average band is now the nearest risk for sellers.

• Staying below 158.23 is more bearish and keeps sellers in charge at that zone.
• Getting back above it and holding there would reduce the importance of the downside break.
• To the downside, today's low near 157.80 is the first level to watch. Breaking it would extend the session's range and offer sellers more confirmation.

Converging 100- and 200-hour moving averages create a clear decision zone. Traders can position against that zone with defined, limited risk. The next direction is unknown, but the level that would invalidate the trade idea is clear.

Currency ranges: USDJPY has the most room left to run.

Measured against 22-day average ranges, the three major pairs are showing different conditions today:

• EURUSD: 1.1209 to 1.1269 — about 60 pips, roughly 92% of its 65-pip average range.
• USDJPY: 157.80 to 158.18 — about 38 pips, roughly 38% of its 101-pip average range.
• GBPUSD: 1.1268 to 1.1349 — about 81 pips, roughly 111% of its 73-pip average range.

USDJPY has used the smallest portion of its average range, so relative to recent conditions it has the most room to extend.

EURUSD has covered most of a typical day's range, while GBPUSD has already moved beyond its average. Neither pair is forced to stop, however. The average describes normal activity, not a ceiling.

US stock futures are sending mixed signals.

Dow futures are modestly lower, S&P futures are slightly higher and Nasdaq futures are pointing to a larger decline:

• The Dow contract is off 10.69 points.
• The S&P 500 contract is up 8.4 points.
• The Nasdaq contract is down 96 points.

That leaves technology as the weakest sector heading into the North American open.

Treasury yields are pushing higher.

Yields are higher across the curve, with the biggest gains at the long end:

• The 2-year yield is at 4.7571%, up 0.61 basis points.
• The 5-year yield is at 4.9166%, up 1.96 basis points.
• The 10-year yield is at 5.1103%, up 2.33 basis points.
• The 30-year yield is at 5.4518%, up 2.38 basis points.

The 10-year yield has climbed back above 5.10%, yet that move has not given the dollar broad strength this morning. Even after yesterday's strong PPI, yields fell. Make of that what you will.

European stocks are mostly in the green.

• Germany's DAX is at 25,585.68, up 0.80%.
• France's CAC 40 is at 7,951.61, up 0.21%.
• The UK's FTSE 100 is at 10,830.91, down 0.09%.
• Spain's IBEX 35 is at 19,318.91, up 0.74%.
• Italy's FTSE MIB is at 49,732.12, up 0.34%.

Gold, silver and Bitcoin are all a bit higher.

Gold trades near $4,177.92, up roughly 0.17%. Silver is around $57.80, up about 0.74%.

Bitcoin is around $82,656, up roughly 0.64%.

North American session ahead

The US data schedule has another inflation report followed by industrial production numbers:

• At 8:30 AM ET, September import prices are due.
• At 9:15 AM ET, September industrial production and capacity utilization arrive. Production is expected to rise 0.4%, after an unchanged August reading.

Import prices will round out the inflation picture after this week's CPI and PPI reports. Production data will show whether activity is keeping up with those price pressures.

The dollar's reaction is the key. To change course, firmer data must produce sustained dollar buying.

EURUSD: buyers head for the day's high.

EURUSD is near 1.1256, toward the top of its range, with the day's high at 1.1269 as the first hurdle above.

A move through that high would extend the rebound. If buyers fail there, the focus shifts to whether they can keep control during a rotation lower.

GBPUSD: an outsized gain

GBPUSD is around 1.1338, just below its session high at 1.1349.

The pair has already beaten its average daily range, which gives the move context but is not by itself a sell signal. Sellers need a technical trigger to enter, and buyers must hold support to remain in control.