Dollar Index Holds Near Yearly High Ahead of US CPI Data
The US Dollar commences the US CPI week with a lacklustre performance. Financial markets anticipate that US inflation has accelerated in September. MUFG anticipates that the Federal Reserve will maintain interest rates at their current levels this month, barring any unexpected upward movement in the US Consumer Price Index. The US Dollar trades subduedly at the start of the United States Consumer Price Index week. In European trading, the US Dollar Index, which measures the Greenback’s value against six major currencies, is trading nearly unchanged at approximately 102.22.
The USD Index has exhibited a sideways movement following the establishment of a new yearly high at 102.54 last week. This week, the US Dollar is anticipated to experience considerable volatility, as the US CPI data for September is set to be released on Wednesday. The inflation data is anticipated to significantly influence the Federal Reserve’s interest rate expectations. Analysts said in a note that “market expectations for the Fed to stay on hold this month will be tested by the release on Wednesday of the latest US CPI report for September.” MUFG/BTMU add that “unless there is a significant upside surprise for underlying inflation, we expect the Fed to leave rates on hold this month.”
The US CPI report is expected to indicate that the headline inflation has accelerated to 3.7% Year-on-Year, an increase from the prior reading of 3.4%. The core CPI, which excludes volatile food and energy items, is anticipated to register at 2.5% year-over-year, an increase from the prior reading of 2.4%. In the daily chart, the Dollar Index Spot is trading at 102.22, sustaining a bullish near-term outlook as the price remains comfortably above the 20-day exponential moving average at 101.35.
The distance from this dynamic support indicates that the recent advance remains intact, while the Relative Strength Index at 70.65 resides in overbought territory, suggesting that upside momentum is robust yet increasingly susceptible to consolidation or a corrective pause. On the downside, initial support is located at the 20-day EMA around 101.35, where a pullback would be expected to attract dip-buying interest as long as the broader uptrend is preserved. Observing the current situation, the Dollar Index may initiate a new upward movement should it convincingly surpass the annual peak of 102.54.
