Inflation is buoyant and Trump lands in China – North American Mid-Week Market Update

• Mid-Week review where we dive into the major developments for North American and global Markets
• Traders have been preparing for the Trump-Xi meeting for months and it is finally happening, with the two leaders meeting in Beijing
• While the US-Iran war takes a step back in the headlines, economies are not welcoming its side-effects on inflation, exploding in recent releases

Log in to our mid-week North American Markets overview, where we examine current themes in North America and provide an overview of index and currency performance.

Traders have spent months getting ready for the quintessential Trump-Xi summit, and now it is finally taking place.

As the two leaders meet in person in Beijing, the broader market is waiting to see what happens. Many expect this meeting to bring major geopolitical, economic progress and push back against the de-globalization worries that were common in 2025.

While investors await for further news, most asset classes are staying in consolidation.

WTI Crude Oil is the only exception to the market pause. Continuous supply shortages are pushing oil prices back above $100, and even though the US-Iran war is getting less daily coverage, its serious economic effects are becoming more obvious.

Tuesday’s CPI report showed a large 3.7% increase, 0.2% above expectations, but what really worried traders was this morning’s PPI release (Producer Price Index). Wholesale inflation came in at 5.2% year-over-year, much higher than the expected 4.9%.

A 1.4% rise on the month!

These back-to-back inflation reports are not so surprising, but definitely unpleasant. Since producer costs usually lead to higher consumer prices later, the high PPI suggests that retail inflation could remain high in the coming months.

This structural inflation spike almost guarantees there will be no rate cuts at the upcoming meetings, as seen in the Fed Rate pricing.

This rise in structural inflation means the Federal Reserve and other central banks will not be able to find an easy solution.

As seen in the last meetings across major Central Banks, policymakers are already changing their guidance and reconsidering whether to cut rates or raise them further.

Economic clarity from the Trump-Xi talks, the broader FX markets—and particularly the US Dollar—are remaining remarkably stoic, bracing for the next massive fundamental catalyst.

Let's dive right into our Mid-Week North American Markets recap.

Read More:

• Chart alert: Nasdaq 100 faces pullback risk as semiconductor rally shows signs of exhaustion
• Asia open: US inflation reaccelerates to 3.8%, and chip stocks falter
• Gold (XAU/USD) rises slow and steady – In-depth Gold technical analysis

Both the Nasdaq and Japanese Nikkei 225 are dominating the charts over the past week and half, largely outperforming the more defensive and traditional TSX, Dow Jones and DAX.

The US Dollar is rallying slowly towards the 98.50 pivot zone, undoing a decent part of its Ceasefire correction.

The current test will be very important – US Dollar bulls will want to see a continuous rise above the 4H 200-period MA (98.72), while bears will want to see a slowdown and rejection around current levels.

Levels to place on your DXY charts:

Resistance Levels

• 98.50 to 98.70 War Pivot
• 4H 200-period MA (98.72)
• 99.30 to 99.50 Resistance
• 100.00 to 100.50 Main resistance and Range highs
• War Highs 100.544 (Double Top)

Support Levels

• 98.18 4H 50-period MA
• 98.00 Major Support
• Support 97.40 to 97.60
• 2025 Lows Major support 96.50 to 97.00

The Dollar is back in a much stronger position after recent weeks of struggle, but the rise isn't uniform – With the exception of the Yen, all Asia-Pacific major currencies are up against the greenback, as their respective Central Banks' hawkish pricing dominates!

The Canadian Dollar is actually losing some ground against all majors – A bizarre divergence when looking at Crude prices still exploding every second.

This will be a divergence to capture for some mean-reversion traders if this dynamic doesn't correct by then.

Volatility in FX Markets is slowly decreasing and USD/CAD, while rallying from its range lows, seems to be decreasing the pace of its rise, as indicated by the diverging RSI from overbought levels.

Levels to place on your USD/CAD charts:

Resistance Levels:

• 1.3720 – 1.3750 Resistance
• 1.38 mini-Resistance +/- 150 pips
• 1.39 to 1.3925 Support turned resistance (range highs)

Support Levels:

• 1.3630 to 1.3660 Key Support now Pivot (4H 50-period MA)
• 1.3550 Main 2025 Support (Range Lows)
• 1.35 Key Psychological Support
• End-January Lows 1.34820

Except for the many Fed Speeches expected throughout the coming 7 days, traders will await for a few economic releases including the NY Fed Empire Manufacturing release next Monday, and Canadian CPI on Tuesday.

And don't forget the Beige Book next Wednesday afternoon!

Safe Trades!

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