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Today’s PPI print gives markets the next checkpoint.
PPI is due at 8:30 AM ET, or 8:30 PM in Beijing, and a hotter reading would make it harder for traders to keep brushing off yesterday’s CPI surprise.
A softer print would not erase the inflation concern, but it would give markets a better excuse to keep treating the current setup as uncomfortable rather than immediately dangerous.
If oil keeps pushing higher, yesterday’s CPI print becomes harder to dismiss as a one-off annoyance.
Energy already played a large role in the latest inflation increase, so traders now have to decide whether inflation risk is being re-priced properly, and that risk appetite can keep absorbing bad news.
After that, attention turns to Trump’s China visit. He is set to arrive in Beijing on Wednesday, while the formal welcome ceremony and main bilateral meeting with Xi are scheduled for Thursday morning Beijing time.
So for markets, today is more about positioning into the visit, while tomorrow is when the bigger Trump-Xi headline risk begins.
This could either turn into a fairly dull diplomatic event with polite language and not much substance, or a broader indicator for inflation and oil shock risks to come.
What Traders Are Watching
The market is currently stuck between a strong earnings story and a renewed inflation problem.
On the supportive side, AI earnings have been strong, jobs data has not fallen apart, and equities barely cracked after CPI.
On the pressure side, oil is up sharply, the dollar is holding support, USD/JPY remains firm, and PPI could confirm that inflation pressure is still moving through the system.
The main checks are:
This is why today is less about one single headline and more about whether the inflation, oil, and geopolitical pieces start pointing in the same direction.
DXY: Dollar Holds Support
DXY closed the day 0.31% higher around the 97.75 to 98.13 support zone, which is the area dollar bears needed to break if the CPI reaction was going to fade quickly.
If DXY starts moving up into the 99.06 to 99.62 zone, markets may begin treating the move as more than a small post-CPI bounce. A firmer dollar would also add pressure to commodities, emerging-market FX, and risk assets.
If DXY loses 97.75 to 98.13, then the inflation scare probably starts looking more contained. For now, though, the dollar is still doing enough to keep traders cautious.
But if DXY breaks above 99.06 to 99.62, I would personally consider the market to be entering a more bullish environment for the dollar.
This is based on my own “Bands Trend Filter Logic”, where I use the 50 EMA with Bollinger Bands set to 1 standard deviation.
The interesting part is that DXY is now close to a second consecutive break above the upper band without flipping direction. In my framework, that usually signals a stronger bullish environment rather than just a one-day reaction.
You can also look left on the daily chart to see how this logic has previously helped identify bullish and bearish environments on DXY.
USD/JPY: Still Firm Around the EMA Zone
Supporting the US Dollar’s strength gain is the USD/JPY chart.
Yesterday, USD/JPY gained 0.29% and is still holding around the 200 EMA band area, with the 160 zone overhead and 150 zone sitting as the broader downside reference.
Technically, it is still holding a critical zone and as long as that EMA band (set to 0.25 sd) isn’t broken, USD/JPY is bullishly rangebound.
Oil: The Main Chart Today
USOIL jumped 3.71% and is now pressing into the 100.90 to 102.50 resistance zone. A clean break above this area would suggest traders are no longer treating the Iran and energy-risk story as a short-term scare.
Above 102.50? The next major area to watch is 105 to 106.80.
If oil accepts above resistance while PPI also comes in hot, inflation fears could get louder fairly quickly. That would make the equity market’s calm reaction to CPI look more fragile, especially if DXY stays firm at the same time.
If oil rejects the zone and slips back below 100.90, markets may get some relief, and the CPI scare may look more manageable.
Gold: Markets Still Not Interested to Reprice Above $4,800
Gold closed 0.42% lower, which is interesting because geopolitical risk is still around, but gold is not giving a clean panic-hedge signal.
The key area is the $4,800 zone, which marks the value area low from the January to March decline. For Volume Profile traders, this matters because price tapped the lower edge of the prior value area (most traded zones) and failed to get accepted back inside it; signalling that markets are currently not interested in repricing Gold back to its former range.
Gold also reacted near a smaller Fibonacci retracement 61.8% area, while still sitting below the larger bearish Fib level near $4,915.
Unless gold reclaims and holds above $4,809, my technical bias still leans lower.
Further decline could bring us to $4,645 and $4,510 as the next downside zones.
Trump-Xi: Watch the Actual Substance
Trump’s arrival in China matters for broader market positioning across equities, commodities (oil and gold), and the Dollar.
Markets will be keeping on eye on news releases regarding these key points:
I could have missed a few points — but for the most part, if nothing of the sort is mentioned after tomorrow’s meeting, then markets could just lean on today’s PPI release as the key market mover.
Bottom Line
Markets are still resilient, but the setup is more fragile than it looked a week ago.
CPI came in hot, oil jumped, DXY held support, USD/JPY stayed firm, and gold failed to reclaim value. None of that confirms a full risk-off shift yet, but it does mean traders now need more confirmation before assuming the AI-led rally can keep ignoring inflation.
Stay alert for these scenarios:
PPI today will act as a confirmation for whether inflation will remain hot in the near-term.
DISCLAIMER: For educational purposes only. Trading comes with substantial risk, leading to possible loss of your capital. Traders are advised to do their own due diligence before investing.
