Forex Today: US Dollar finds its feet amid cautious optimism

Here is what you need to know on Tuesday, September 12:

Markets are seeing a bit of a recovery in risk sentiment after Reuters reported, citing sources, Country Garden, China's largest private property developer, has won approval from its creditors to extend the repayments on six onshore bonds by three years. Asian indices are posting modest gains, further supported by the tech stocks rally on Wall Street overnight.

Tesla jumped 10.1%, Amazon climbed 3.5% and Meta Platforms rose 3.2%. Apple rose 0.7% ahead of a Tuesday event where it the company is expected to release its latest iPhone model.

Amidst risk reset, the US S&P 500 futures have pared early losses but struggle with the recovery, as investors continue to trade with caution, weighing the recent policy guidance from the Chinese and Japanese central banks. A sense of caution also prevails ahead of Wednesday’s all-important Consumer Price Index (CPI) data from the United States, which will indicate where the US Federal Reserve (Fed) has further to go on rate increases.

The US Dollar is finding a floor after losing the most in two months on Monday, although the upside could be limited, in the absence of high-impact US economic data releases and a sluggish performance in the US Treasury bond yields.

USD/JPY is extending the recovery toward 147.00 after Hiroshige Seko, Japan’s ruling Liberal Democratic Party’s (LDP) Upper House secretary-general, said that “BoJ Gov Ueda has said that exit from the easy policy will be after achieving the 2% inflation target.”

EUR/USD is consolidating its rebound near 1.0750, as traders brace for Germany’s ZEW survey. Euro traders digest the EU Commission’s downgrade to the Eurozone’s growth forecasts. GBP/USD is holding its range above the 1.2500 threshold after the mixed UK jobs report showed that earnings grew at a joint-record pace while unemployment rose in the economy. Meanwhile, Bank of England (BoE) policymaker Catherine Mann said on Monday, "I would rather err on the side of over-tightening. But, if I am wrong, and inflation decelerates more quickly and activity deteriorates more significantly, I will not hesitate to cut rates.”

AUD/USD is trading back and forth in a 25 pips range above 0.6400, as the renewed China optimism is offset by a pause in the US Dollar sell-off. Meanwhile, USD/CAD is reapproaching the 1.3600 mark, notwithstanding the latest upswing in WTI prices.

Gold price is holding steady while defending the critical 200-Daily Moving Average (DMA) at $1,920 amid a lack of fresh catalysts and pre-US inflation data repositioning.