US Dollar Looks to the CPI Data for Relief

The US Dollar Index (DXY) is currently on a downward trajectory, falling for a third consecutive day ahead of the crucial US Consumer Price Index (CPI) data release later today. This data is expected to shed light on inflation levels, a key factor influencing Federal Reserve interest rate decisions. 

Market expectations are for core CPI to show a modest increase of 0.3% month-on-month in April, down from 0.4% in March. While this suggests a potential cooling of inflation, a higher-than-anticipated figure could reignite concerns and strengthen the dollar on expectations of a higher-for-longer monetary policy stance. Conversely, a lower inflation print could weaken the dollar as it reduces the urgency for aggressive monetary tightening. 

Technical Analysis 

The 4-hour chart shows the DXY currently sits at 104.835, reflecting a continuation of the downtrend. The price action trades comfortably below the downward-sloping 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), indicating strong bearish momentum. 

Therefore, with the downward-sloping RSI (30.32) trading comfortably below the 50.00 level, a continued decline could find significant support at the 104.462 price level lower. A break below this level, accompanied by significant volume, could exacerbate the selling pressure and bring the 104.006 and 103.478 support levels into play. 

Conversely, if the bulls manage to regain control, a potential area of resistance lies at 105.291. A decisive break above this level could open the door for a test of 105.693 and 106.513 in the near term. 


The US Dollar Index is under pressure ahead of the crucial US CPI data release. A hotter-than-expected inflation print could reverse the recent downtrend, while a cooler figure could exacerbate the dollar’s weakness. Technically, the DXY displays a strong bearish bias with key moving averages aligned in a downtrend. The immediate focus is on the 104.462 support level, with a break potentially leading to further downside. Conversely, a surge above 105.291 could signal a short-term bullish correction. The overall sentiment hinges on the upcoming US CPI data and its implications for future Fed policy.  

Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, and MT Newswire. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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