US Dollar Index (DXY) Analysis Ahead of Inflation Data
The US dollar index pulled back to the lowest level since August 26 as investors wait for the upcoming inflation data. It dropped to a low of $107.80, which was substantially lower than last week’s high of $110.81.
US inflation data
The US dollar index has been in a strong bearish trend in the past few days as the bullish momentum waned. Focus now shifts to the upcoming American inflation data, which will come out on Tuesday.
Economists polled by Reuters expect data to show that the country’s inflation eased slightly in August. Precisely, they believe that inflation moved from 0.0% in July to -0.1% in August. On a year-on-year basis, the headline CPI is expected to drop from 8.5% to 8.1%. If this is accurate, it will be the second straight month that inflation has dropped.
Meanwhile, core inflation, which excludes the volatile food and energy prices, is expected to have made some modest gains. Precisely, economists expect that inflation rose from 5.9% to 6.1%.
The US dollar index will also react to the latest producer price index (PPI) that is scheduled on Wednesday. Analysts expect the data to show that the headline PPI dropped from 9.8% to 8.8% while core PPI dropped from 7.6% to 7.1%.
The other important economic data to that will move the DXY index will be the latest US retail sales numbers scheduled for Thursday. Analysts expect the data to show that retail sales rose by 0.2% while core sales rose to 0.1%.
US dollar index forecast
The four-hour chart shows that the DXY index has been in a strong bearish trend in the past few days. It has managed to move below the important support level at $109.30, which was the highest level on July 14. The pair moved below the 25-day and 50-day moving averages while the awesome oscillator moved below the neutral level.
Therefore, the dollar index will likely continue falling as sellers target the next key support level at $107. A move above the resistance level to watch will be at 109.