Forex Signals Brief May 14: USD Sellers Return After Soft US CPI Inflation

While inflation is cooling, it’s not enough to force the Fed’s hand just yet. Equities and oil are holding firm, but behind the scenes, shifting FX flows, faltering gold prices . Softer Inflation Data Shakes Currency Markets The latest U.S. Consumer Price Index (CPI) report delivered a softer-than-expected print, triggering a notable shift across foreign exchange markets. Headline CPI came in at 2.3%, slightly below the 2.4% consensus forecast, while the broader measure dropped to its lowest reading since 2021. While the initial market reaction was muted, the steady accumulation of selling pressure eventually led to a sharp decline in the U.S. dollar. Fed Expectations Shift Cautiously, But Rate Cut Bets Still Alive Despite the weaker inflation data, market-based expectations for Federal Reserve rate cuts remained largely unchanged. Traders still price in a roughly 40% chance of a rate cut in July, with near-unanimous expectations for easing by September. However, it’s worth noting that these probabilities have been slowly declining over the past three weeks, suggesting a more cautious approach by investors as macro data unfolds. Equities and Oil Hold Steady as Risk Appetite Remains Risk-on momentum in equities and commodities mostly persisted despite currency market volatility. The S&P 500 (ES futures) saw robust buying interest before the open, contributing to another day of solid gains. Still, there are early signs that recent dollar strength, partly fueled by steady equity inflows, may be losing steam. Bond Yields and Fiscal Watch: All Eyes on Congress U.S. Treasury yields continue creeping higher, approaching levels not seen since the Trump administration. With attention now turning to a proposed tax cut bill in Congress, the fixed income space could be poised for renewed volatility. Rising yields may attract investor scrutiny, especially as fiscal dynamics begin to intersect with monetary policy expectations. Today’s Market Outlook: May 12–16, 2025 Today the main event is the Australian wage price index q/q and the consensus is 0.8% vs. the prior 0.7%. In the December quarter, wage growth came in below analyst forecasts and the market consensus. Last week, markets were slower than what we’ve seen in recent months, with gold retreating as a result, the EUR/USD falling below 1.11, and stock markets continuing upward. The moves weren’t too big, but we opened 37 trading signals in total, finishing the week with 25 winning signals and 12 losing ones. Gold Cools Off After Record Highs Gold markets experienced a significant pullback following their historic surge to $3,500 per ounce in April. Spot gold has now corrected by nearly $140, falling to around $3,300 before rebounding slightly to stabilize near $3,250. The 1.9% drop over two days may reflect a broader rotation into risk assets, fueled by renewed optimism after the announcement of a new U.S.-UK trade agreement. Nevertheless, gold’s recent behavior is often interpreted as a signal of caution lurking beneath surface-level optimism. USD/JPY Strength Persists, But Yen Faces Ongoing Pressure In FX, the USD/JPY pair continues to demonstrate resilience, recently climbing to 146.00 after breaking decisively above the psychologically important 140.00 level. However, despite intermittent recoveries, the Japanese yen remains fundamentally weak amid shifting global risk sentiment and sustained dollar strength. Yesterday’s upward move was capped at the 200-day simple moving average around 148.50, where sellers reemerged. The pullback prompted a tactical long entry, as buyers seek to reestablish control. USD/JPY – Weekly Chart Cryptocurrency Update Bitcoin Consolidates Above $100,000 Bitcoin saw a robust resurgence, climbing more than 6% to trade above $103,850—its first move above the $100,000 mark since February. The recent gains have been attributed to the bullish sentiment surrounding the U.S.-UK trade deal and renewed optimism for future progress in U.S.-China relations. Bitcoin’s strength stands out, particularly in contrast to corrections in traditional safe-haven assets like gold. BTC /USD – Weekly chart Ethereum Tests MAs after Rebound Following Pectra Upgrade ETHEREUM also staged a notable comeback after a prolonged downward trend from a January high of $3,634 to an April low of $1,475. The successful rollout of the Pectra update, which introduced enhancements to staking and wallet features, has fueled a rally of nearly 20%. The ETH price now sits above $2,200, reversing months of bearish momentum and bolstering the broader crypto recovery. ETH/USD – Weekly Chart