United States Dollar Index Price Forecast: Bulls await US CPI and breakout above 100.00

DXY trades with a positive bias for the third straight day as traders await the US CPI report.
Geopolitical risks and Fed hike bets amid inflation fears continue to underpin the US Dollar.
The mixed technical setup warrants some caution before positioning for any further upside.

Haresh Menghani FXStreet

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, retains a positive bias for the third straight day on Wednesday, though it lacks bullish conviction. The index remains below the 100.00 psychological mark through the first half of the European session as traders keenly await the release of the latest US consumer inflation figures.

The crucial data will be looked upon for cues about the US Federal Reserve's (Fed) policy path, which, in turn, would provide a fresh directional impetus to the DXY. In the meantime, inflation risks stemming from volatile oil prices keep Fed rate hike bets on the table and remain supportive of elevated US Treasury bond yields. This, along with geopolitical uncertainties, continues to act as a tailwind for the safe-haven US Dollar (USD) and favors bulls.

From a technical perspective, the DXY holds below a dense Fibonacci retracement stack and the 200-period Exponential Moving Average (EMA) on the 4-hour chart. Meanwhile, the Moving Average Convergence Divergence (MACD) stays marginally in positive territory, while the Relative Strength Index (RSI) hovers near 51. This, in turn, points to a modest recovery in momentum that has yet to overcome the prevailing overhead structure.

Hence, it will be prudent to wait for a move beyond the 23.6% Fibonacci retracement level of the slide from the July swing high before positioning for further gains to the 38.2% retracement at 100.26 and the 50.0% level at 100.53. Higher up, the 61.8% Fibo. retracement at 100.79 and the 78.6% level at 101.17 precede the cycle high area at 101.65, while the 200-period EMA at 100.41 reinforces this broader cap.

On the downside, the key support to watch is the Fibonacci anchor near 99.40, where a break would reopen the path toward deeper weakness in the DXY.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

DXY 4-hour chart

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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