US Dollar Forecast: DXY Inches Higher Ahead of Critical November CPI Report

U.S. Dollar Index Holds Ground as Markets Await Critical Inflation Data

The U.S. Dollar Index edged modestly higher Wednesday, trading near 98.54 after surrendering most of its earlier gains. The greenback found support at 97.869 within a major retracement zone spanning 98.307 to 97.814, briefly surging to 98.639 before pulling back.

With the 200-day moving average at 99.264 nearing a bearish crossover beneath the 50-day moving average at 99.222, traders are bracing for potential volatility ahead of Thursday’s November Consumer Price Index release.

The dollar index remains down approximately 9.5% year-to-date, tracking toward its steepest annual decline since 2017, despite recent stabilization near early October lows.

At 16:13 GMT, DXY is trading 98.324, up 0.113 or +0.12%.

Mixed Jobs Data Keeps Federal Reserve on Sidelines

November’s employment report delivered a complicated picture for monetary policy. Nonfarm payrolls added 64,000 jobs, exceeding the 45,000 consensus estimate, but October figures were sharply revised to show 105,000 job losses. August payrolls were revised down by 22,000 to -26,000, while September’s gains were trimmed by 11,000 to 108,000.

More concerning, the unemployment rateclimbed to 4.6% from 4.4% in September, marking a four-year high. Jeff Schulze, head of Economic and Market Strategy at ClearBridge Investments, noted the data “set a modestly dovish tone for U.S. monetary policy in 2026,” adding that rising unemployment “will keep the hopes of another cut alive in the first quarter since labor slack appears to be gradually building.”

Federal Reserve Chair Jerome Powell previously suggested payroll figures may have been overstated by up to 60,000 monthly since April, indicating underlying weakness could exceed surface-level readings. Fed funds futures currently price just a 22% probability of a January rate cut, with markets anticipating two cuts throughout 2026 despite the Federal Reserve projecting only one.

Inflation Report Faces Data Complications

Thursday’s CPI release arrives under unusual circumstances. Barclays economist Pooja Sriram warns the November report “is unlikely to be seen as a ‘clean’ read on inflation” because the Bureau of Labor Statistics won’t publish separate October data following delays from the 43-day government shutdown. Markets must instead rely on two-month changes from September to November.

Sriram forecasts a cumulative 0.5% increase for headline CPI over that period, with year-over-year inflation reaching 3.1% driven by higher energy prices. Core CPI is expected to rise 0.6% cumulatively and 3.1% annually.

Treasury Yields Edge Higher Ahead of Key Data

U.S. Treasury yields ticked modestly higher Wednesday as investors positioned ahead of inflation data. The benchmark 10-year Treasury yield rose less than 2 basis points to 4.165%, while the 2-year yield increased to 3.495% and the 30-year climbed to 4.835%.

Short-Term Outlook: Cautiously Bearish

The dollar faces headwinds from persistent labor market softening and the potential for dovish Federal Reserve policy adjustments in early 2026. A breakdown below the critical retracement zone at 98.307 to 97.814 could trigger accelerated selling toward 96.218.

However, if Thursday’s CPI data surprises to the upside, the greenback could mount a relief rally. Until inflation clarity emerges, the dollar’s downtrend remains intact with limited conviction for sustained recovery.

More Information in our Economic Calendar.