US Dollar Forecast: DXY Stabilizes as CPI Data Uncertainty Limits Selling

DXY Stabilizes as CPI Uncertainty Draws Buyers Back In

The U.S. Dollar Index edged higher late Thursday after stabilizing from an early-week selloff tied to softer U.S. inflation data. After plunging to 97.869 on Tuesday, the DXY rebounded to 98.639 as traders reassessed the durability of the disinflation signal and responded to stabilizing price action near key Fibonacci levels.

While cooling inflation initially pressured the dollar through lower yields, uncertainty around the quality of the CPI report and mixed global central bank signals helped slow downside momentum, allowing buyers to re-enter at well-defined technical levels.

At 19:22 GMT, DXY is trading 98.447, up 0.053 or +0.05%.

Shock Tempered by Data Caveats

Thursday’s delayed CPI report showed headline inflation rising 2.7% year over year, well below the 3.1% consensus. Core CPI also undershot expectations at 2.6% versus a 3% forecast. Normally, softer inflation reduces rate expectations and weakens the dollar by lowering yield support. That dynamic was visible immediately after the release, with the DXY dipping toward 98.3.

However, the Bureau of Labor Statistics confirmed the report lacked standard components due to the inability to collect October survey data. That raised concerns about distortions, limiting trader conviction. As a result, markets hesitated to aggressively price in faster Federal Reserve easing, helping the dollar stabilize.

Labor data also remained supportive. Initial jobless claims fell to 224,000, easing concerns about a rapid labor market breakdown. This tempered expectations for an urgent Fed response despite softer inflation.

Central Bank Messaging Caps Dollar Losses

Cross-currency flows also helped contain dollar weakness. The Bank of England delivered a rate cut but paired it with a narrow 5–4 vote and guidance suggesting future decisions would be finely balanced.

The ECB held rates steady and lifted some growth and inflation projections, reinforcing the idea that policy easing outside the U.S. may be nearing its end. These signals limited relative rate advantages for the euro and pound, reducing pressure on the DXY.

Lower Rates, Controlled Reaction

Treasury yields moved lower following the CPI release, with the 10-year yield falling to around 4.12%. Falling yields typically weigh on the dollar by reducing carry appeal, but the move remained orderly. Risk assets firmed initially, yet positioning appeared cautious as traders questioned whether the CPI data accurately reflects underlying inflation.

Key Levels Define the Battle

Technically, the DXY found support just above the intermediate Fibonacci level at 97.869 and is now oscillating between two 50% levels at 98.307 and 98.591.

A sustained move above 98.591 would signal buyer control, opening the door toward the pivot at 99.132, followed by the 50-day moving average at 99.206 and the 200-day moving average at 99.239.

Traders are also watching the 200-day moving average, which is close to crossing below the 50-day, a pattern that could trigger sharp downside reactions if upside attempts fail. A sustained break below 98.307 would refocus attention on 97.814, where renewed selling pressure could accelerate.

In the short term, the DXY appears rangebound with a slight bullish bias as long as 98.307 holds. Uncertainty surrounding inflation data quality and steady labor readings reduce the odds of aggressive dollar selling, while a confirmed break above 98.591 would favor a stronger recovery toward the upper technical targets.

More Information in our Economic Calendar.