QCP Capital: Wall Street shows no signs of panic, CPI data may become a key catalyst for the dollar index

Singaporean cryptocurrency investment firm QCP Capital stated today that the market has been very boring over the past two weeks. Despite ongoing tariff measures between the United States, Canada, and Mexico, as well as tariffs imposed on Chinese imports and US steel and aluminum imports, traditional financial (TradFi) markets have yet to find a clear direction. According to various indicators, Wall Street does not show signs of panic. Credit yields remain at cyclical lows and there is no widening in credit spreads between investment-grade bonds and junk bonds. The VIX index seems stable around 16, indicating that market participants have bought protection against any further negative news. Powell's testimony in the Senate reinforced the Federal Reserve's 'wait-and-see' attitude towards interest rate cuts, suggesting a possible slowdown in rate cuts by 2025. However, despite this hawkish rhetoric, the US Dollar Index (DXY) failed to rise.

Referring to data from the Commodity Futures Trading Commission (CFTC), we infer that there is heavy long positioning in USD. Interest rate differentials also suggest that USD is overvalued relative to other currencies which may explain why DXY struggles for upward momentum. Given that negative news might already be priced in, we believe USD now faces greater downside risk. Any positive news could force investors who are long on USD to close their positions en masse potentially pushing up prices of risky assets.The release of Consumer Price Index (CPI) tonight could trigger a significant drop in DXY.

However,this rally may not benefit everyone.Bitcoin continues underperforming stocks and gold,suggesting some hesitation within crypto community.Liquidity remains thin for many new projects listed each week,and last week’s large-scale liquidation left many traders penniless.For those still holding long positions on cryptocurrencies,following institutional capital flows and buying downside protection might be best strategy—especially since put options are relatively cheap right now.