US Dollar Forecast: DXY Gains as Gold Falls and Euro Retreats on Inflation Jitters

US Dollar Index Eyes Key Resistance at 50-Day Moving Average as Sentiment Data Challenges Fed Outlook

The U.S. Dollar Index (DXY) moved modestly higher Friday, hovering near 101.30 and pressing against a key technical barrier—its 50-day moving average at 101.80 today.  After falling earlier in the week on soft inflation data, the dollar rebounded late as consumer sentiment data reignited inflation concerns, complicating the market’s rate cut expectations.

At 14:55, the U.S. Dollar Index is trading 101.219, up 0.411 or +0.41%.

Sentiment Data Reverses Early-Week Disinflation Narrative

While April’s CPI and PPI showed encouraging signs of easing inflation—CPI rose just 2.3% year-over-year and PPI fell 0.5% month-over-month—Friday’s University of Michigan survey painted a different picture. The headline consumer sentiment index dropped to 50.8, while one-year inflation expectations surged to 7.3%. Traders were forced to reassess the disinflation story, especially with consumers citing tariffs as a growing concern, potentially foreshadowing cost pressures ahead.

Fed Caught Between Data and Expectations

Earlier in the week, markets leaned toward a dovish read on the inflation outlook, pricing in over 50 basis points of Fed rate cuts by year-end. But the sharp rise in consumer inflation expectations complicates that view. Fed Governor Michael Barr emphasized the economy’s solid footing but cautioned that trade-related uncertainties could dampen both business and household confidence. That leaves the Fed data-dependent—and the dollar reactive.

Dollar-Gold Relationship Reflects Fed Rate Uncertainty

Gold prices have been especially sensitive to the dollar’s swings this week, initially climbing on softer CPI and PPI data before reversing as the dollar steadied. With real yields bouncing slightly and the dollar holding near its 50-day moving average, gold retreated below $3,200/oz. The inverse relationship remains intact: rising expectations of Fed cuts typically weaken the dollar and lift gold, but Friday’s consumer inflation expectations have muddied that setup, leading to choppy two-way trade.

Dollar-Euro Trade Stalls Below 1.12 Resistance

The euro gained earlier in the week as U.S. inflation data supported dovish Fed bets, pushing EUR/USD toward the 1.12 level. However, the rally stalled as the dollar found support and U.S. sentiment data reignited inflation concerns. While the European Central Bank is expected to cut rates as early as next month, the Fed’s path is now less certain, narrowing rate differentials and limiting further euro upside for now. Traders are watching for a break above 1.12 to confirm bullish momentum or a retreat back toward the 1.10–1.1050 support zone.

Technical Focus: DXY Tests 50-Day Moving Average

From a technical standpoint, the DXY is pressing against its 50-day moving average, which now serves as immediate resistance. A decisive close above this level could open the door toward the 200-day moving average near 104.25. If rejected, support sits at 99.40, with stronger downside levels at 97.70. The dollar’s struggle to clear its 50-day average underscores traders’ hesitance to commit ahead of further Fed clarity.

Outlook: Dollar Rangebound Without Fed Confirmation

With no firm signal from the Fed and conflicting inflation inputs, the dollar remains trapped in a tug-of-war between softening price data and stubborn inflation expectations. Until the Fed addresses the disconnect, the DXY is likely to trade sideways below its 50-day moving average, with potential for sharper moves depending on incoming data and policy commentary. Traders should continue to watch technical levels and sentiment-driven indicators closely.

More Information in our Economic Calendar.