QCP: Tonight's CPI could be the catalyst for a sharp drop in DXY

 on February 12th, QCP released a daily report stating, "Bored to death! This is the current situation in the market over the past two weeks." Despite the ongoing tariff actions between the United States, Canada, Mexico, and the tariffs imposed on Chinese and American steel and aluminum imports, the traditional financial (TradFi) markets have failed to find a clear direction. There are no signs of panic on Wall Street based on multiple indicators. The VIX index seems to be stuck at 16, indicating that market participants have taken protective measures against further negative news.

Powell reiterated the Fed's cautious stance in his testimony to the Senate, suggesting that the pace of interest rate cuts in 2025 may be slower. Despite this hawkish attitude, the US Dollar Index (DXY) has not risen. According to CFTC data, it is inferred that the market holds a large number of long positions in the US dollar. Interest rate differentials also indicate that the US dollar is overvalued compared to other currencies, which may explain why the DXY is struggling to gain momentum. Given that negative news may have already been absorbed by the market, we believe that the US dollar now faces greater downside risks.

Any positive news could force a large number of long positions in the US dollar to liquidate, potentially driving up risk assets. The release of CPI tonight could be a catalyst for a significant drop in the DXY. However, this upward trend may not benefit all ships.

Bitcoin (BTC) continues to underperform, lagging behind stocks and gold, indicating some hesitation within the crypto community. Liquidity remains thin among the numerous new listings added weekly, and last week's massive liquidation resulted in heavy losses for many traders. For participants still holding long positions in cryptocurrencies, tracking institutional fund flows and purchasing downside protection may be the best strategy at the moment, especially since buying put options is relatively cheap.