The USD is showing mixed results against three major currency pairs as we approach the US PPI and job claims data. The USDJPY has dropped sharply after crossing multiple technical levels. The EURUSD fell initially but bounced back slightly as early buyers moved in at support levels. Meanwhile, the GBPUSD remains mostly stable.

US Producer Price Index Expectations

Analysts expect the US Producer Price Index (PPI) to rise by 0.2%, including both the headline and the core figures excluding food and energy. Year-over-year, it’s predicted to reach 2.5%, up from 2.3% last month, while the core measure is set to rise to 2.9% from 2.6%. Initial jobless claims data will also be released, with forecasts predicting 228,000 claims, compared to last week’s 226,000. In pre-market trading, US stocks are showing slight gains. The Dow is up by 30 points, the S&P by 2.67 points, and the Nasdaq by 16 points. The dollar’s performance is mixed as we await important inflation and labor market figures. A higher-than-expected PPI could indicate strong inflation, likely strengthening the US dollar as it would encourage a more hawkish stance from the Federal Reserve. We are preparing for possible volatility when the data is released at 8:30 AM ET.

Market Reaction and Strategies

We’ve seen similar patterns before, especially after last month’s CPI report, which showed a 3.4% increase. This slight rise kept policymakers on alert. The market remembers that, in its late July meeting, the Fed noted that inflation risks remain on the rise. A high PPI today could reinforce this sentiment and lead to a significant market reaction. In this context, traders should think about using derivatives that benefit from price swings. There’s a growing demand for at-the-money options straddles on the EURUSD pair to capture sharp price movements. The CBOE EuroCurrency Volatility Index (EVZ) has risen to 7.9 this week, up from a low of 6.5 in late July, indicating that the market is preparing for volatility. The recent drop in the USDJPY is particularly striking, especially after breaking below the critical 145.00 support level, which had held during the second quarter of 2025. This decline seems driven by more than just dollar weakness, as speculation mounts that the Bank of Japan is getting ready for a significant policy change away from its ultra-loose approach—a stance we haven’t seen from the BOJ in over a decade. On the other hand, the EURUSD found support near the 1.0750 technical zone. This strength follows an unexpected 0.5% increase in June’s German industrial production, easing fears of a deep Eurozone recession. However, a strong US PPI report could easily erase these gains and push the pair below this support level. The expected initial jobless claims figure of 228K will provide key insights into the US labor market’s health. In 2024, claims consistently stayed below 220K, so the recent upward trend is being watched closely. For now, equity markets remain calm, with futures showing slight gains, suggesting a wait-and-see attitude ahead of the upcoming data. Create your live VT Markets account and start trading now.

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