US Dollar Forecast: DXY Set for Volatility Next Week as CPI Data Drives Fed Cut Odds

U.S. Dollar Index Slips Into CPI Week as Rate-Cut Bets Build

The U.S. Dollar Index closed last week at 98.264, down on the week as traders stayed positioned for Federal Reserve rate cuts. Fresh catalysts were limited, but earlier data and policy headlines kept the pressure on the greenback.

The next major test comes with the U.S. CPI on Tuesday, August 12 at 12:30 GMT, which could set the tone for the week ahead.

Last week, the U.S. Dollar Index settled at 98.264, down 0.420 or -0.43%.

August 1 Nonfarm Payrolls Still Driving Positioning

Although the July nonfarm payrolls report was released on August 1, it’s still shaping sentiment. The weaker-than-expected headline and downward revisions to previous months signaled cooling in the labor market. Traders haven’t let that go—Fed funds futures continue to price a 90–94% chance of a September cut, and that steady expectation has kept the dollar on the defensive.

Fed Appointment Adds to the Dovish Tilt

President Trump’s temporary appointment of Stephen Miran to the Federal Reserve Board gave markets another reason to bet on looser policy. Miran is seen as favoring easier monetary settings, and the move reinforced the same dovish message the market took from the jobs data.

Weekly Chart Levels to Watch

The weekly chart shows the first resistance at 98.317. A close above here would open the door to the second resistance at 99.177, followed by the minor top at 100.257. On the downside, there’s no strong support until 96.377.

Last week’s inability to break above 99.177 left rallies capped and kept sellers in control.

CPI Will Decide the Next Move

The market is looking for both headline and core CPI to rise 0.2% month-on-month, with core annual inflation edging from 2.9% to around 3.0%. A hotter reading could push DXY through 98.317, bringing 99.177 into play and possibly 100.257 if momentum builds. A softer number would likely confirm the dovish bias and set up a move toward 96.377.

Market Forecast

The dollar starts the week soft below 98.317, with CPI as the clear catalyst. A strong print could flip sentiment quickly and send the index higher toward resistance. A weak one risks accelerating the drop toward 96.377. Expect sharp moves around the release as traders reset positions for the next leg.

More Information in our Economic Calendar.