DXY Outlook: 50-Day Moving Average Caps Gains as PPI Miss Cements September Rate Cut

Dollar Dips After Softer PPI; Fed Rate Cut Expectations Hold Firm

Carl Weinberg of High Frequency Economics noted the report offered a “less scary picture” for pipeline inflation, with core goods prices advancing, but at a slower pace than expected. The data eased inflation concerns without delivering a sufficient dovish surprise to shift rate cut probabilities dramatically.

FedWatch Shows Strong Bias for 25 bps Cut

Following the release, CME FedWatch pricing showed a 100% probability of a 25-basis-point cut in the Fed’s benchmark rate, locking in expectations that had already hovered near certainty before the PPI print. Odds of a more aggressive 50-basis-point move, however, remained subdued at just 10%.

Traders now await the Consumer Price Index (CPI) report, which could provide a clearer signal for the Fed’s longer-term policy stance. A softer CPI could reignite talk of a deeper cut, but BMO’s Ian Lyngen cautioned that Wednesday’s PPI alone “isn’t sufficient to start the conversation about a 50 bp Fed cut.”

Treasury Yields Drift Lower on Rate Cut Bets

U.S. Treasury yields responded modestly. The 10-year yield slipped 2.7 basis points to 4.047%, while the 2-year yield dropped 1.5 basis points to 3.527%. The 30-year yield eased to 4.699%. The curve remained relatively stable, suggesting the bond market is already well-aligned with the Fed’s projected path.

Short-end rates also ticked lower, with the 1-month yield at 4.141% and 3-month at 4.035%, indicating firm expectations of rate relief and limited near-term inflation pressure.

Market Forecast: DXY Stalls Below Resistance as CPI Becomes Key Catalyst

The U.S. Dollar Index is holding below resistance at 97.859, with Wednesday’s PPI-triggered bounce failing to build momentum through the 50-day SMA at 98.100 and horizontal resistance at 98.317. That area has repeatedly capped bullish attempts since mid-August, keeping the near-term bias neutral to bearish.

Immediate support stands at 97.253, the September low. A clean break below that level could open the door toward 97.109, and further into the 96.377 zone if CPI reinforces expectations for continued Fed easing.

If CPI surprises to the upside, a push through 98.317 would bring 98.635 and 98.834 back into focus, with the broader range top at 99.320 marking the next resistance band.

For now, price is coiling between 97.253 and 98.317, with the 50-day SMA acting as the immediate pivot. CPI will be the directional trigger—until then, traders should expect breakout setups only on decisive moves outside that range.

More Information in our Economic Calendar.