S&P 500 Futures - Risk sentiment appears slightly dampened on Tuesday morning, despite Tokyo traders returning after a long weekend. This cautious tone is likely due to anticipation of upcoming U.S. data and mixed developments in key risk areas.

Currently, S&P 500 Futures are down 0.10%, trading at 4,565, the highest level since April 2022. Meanwhile, U.S. Treasury yields are slightly weaker, with the 10-year and 2-year yields hovering around 3.80% and 4.73%, respectively. The U.S. Dollar Index (DXY) remains under pressure amid cautious optimism, weighed down by disappointing data from Monday. Conversely, commodities and Antipodean currencies have posted modest gains recently.

On Friday, concerns raised by the Federal Reserve (Fed) did not linger long, as earlier U.S. economic data failed to sustain optimism about the world's largest economy. Monday’s Empire State Manufacturing Index for July dropped to 1.1 from 6.6, missing the market expectation of 0.0.

Although this data initially did not trigger significant selling pressure on the DXY, it later weighed on the index, erasing Friday's rebound supported by strong University of Michigan (UoM) Consumer Sentiment and inflation expectations.

Elsewhere, U.S. Climate Envoy John Kerry is in China, marking another effort by Washington to improve U.S.-China relations, following Treasury Secretary Janet Yellen's visit earlier this month. U.S. policymakers met China's top diplomat Wang Yi on Tuesday, with Reuters reporting they expressed hope this could pave the way for resolving differences between the two nations.

On the monetary policy front, the European Central Bank (ECB), Fed, Bank of England (BoE), Bank of Canada (BoC), and Swiss National Bank (SNB) appear to face growing economic concerns, supporting the cautious optimism.

Looking ahead, U.S. Retail Sales data for June, expected to rise 0.5% versus the prior 0.3%, will be a key determinant of market direction. Additionally, U.S. Industrial Production for June is forecast to decline by -0.1%, following the previous -0.2%. Updates on U.S.-China relations and bond market movements will also be critical to watch as Japan reenters the market after its extended holiday.

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This analysis is based on fundamental and technical perspectives from reliable sources and does not constitute advice or recommendations. Always remember that this content is intended to enrich readers' information. Always conduct independent research on other forex-related information to use as a reference in your trading activities.

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