US Dollar Index News: DXY Rebound Fueled by Higher Inflation Expectations

Highlights

• U.S. Dollar rebounds following mixed job report
• Above-expected CPI could further boost U.S. Dollar
• Euro and yen dip against strengthening U.S. Dollar

Overview

The U.S. Dollar is on an upward trajectory against a group of major currencies this Monday, rebounding from a one-week low after a U.S. jobs report showing fewer additions in July than anticipated. However, solid wage growth and a dip in unemployment have limited the greenback’s losses, with the U.S. dollar index last observed 0.25% higher at 102.31.

The market now turns its attention to the forthcoming U.S. inflation data, with a predicted core inflation of 4.7% for July. Given the ongoing robust growth in the U.S. and the Federal Reserve’s data-centric stance, any above-expectation CPI numbers could bolster the dollar further.

On the other side of the Atlantic, the euro dropped 0.34% to $1.0975 against the dollar, following the release of data that revealed a greater than expected decline in German industrial production in June. This setback points to the economic headwinds that Europe’s largest economy is grappling with, which could imply that ECB rates might have already peaked.

Meanwhile, in Asia, the yen retreated 0.44% to 142.38 per dollar. This came on the heels of a Bank of Japan meeting that discussed the increasing likelihood of sustained inflation, with a board member suggesting potential for unprecedented wage and price hikes.

Elsewhere, the British pound slipped 0.15% to $1.2732, inching towards a one-month low following the Bank of England’s decision to raise interest rates to a 15-year high of 5.25%. This marks the BoE’s 14th consecutive rate hike, albeit at a slower pace than its prior meeting.

Short-Term Outlook:  Bullish Ahead of  CPI Report

Given these dynamics, the outlook for the U.S. dollar appears bullish in the short term, bolstered by a resilient economy and expected inflation data.

Technical Analysis

The US Dollar Index (DXY) is currently trading at 102.007, a slight decrease from the preceding 4-hour price of 102.080. This price movement suggests a minor retracement.

The index is hovering above both the 200-4H and 50-4H moving averages, at 101.837 and 101.971 respectively, indicating a bullish trend. With a 14-4H RSI of 45.29, there is weaker momentum despite being within a typical range.

The DXY is trading within the main support area of 100.016-99.630 and the resistance area of 103.280-103.424.

Despite the recent dip, the market remains bullish in light of these technical indicators. The key to sustaining the move will be how it responds to the moving averages.