US dollar gains traction ahead of crucial US CPI data

The US Dollar Index (DXY) has demonstrated steady upward momentum over the past 12 hours. This momentum accelerated following remarks from US President Donald Trump, who stated that the Iran ceasefire was “on life support.” Ongoing tensions in the Middle East have heightened inflation concerns, with USD traders closely monitoring the upcoming release of April US inflation data.

The dollar started the week slightly lower as a softer geopolitical environment reduced demand for the safe-haven currency. Nevertheless, bullish sentiment persisted, with buyers striving to maintain the DXY above the 98.00 support level to mitigate further bearish pressure. A failure to hold this level could result in increased selling activity.

The dollar also received additional support from a robust nonfarm payroll report. The US jobs report exceeded expectations, indicating strong labor market conditions. The better-than-anticipated April employment data has led markets to anticipate fewer interest rate cuts from the Federal Reserve in 2026.

Traders should watch today’s CPI data closely

Volatility in the dollar is expected to remain elevated this week due to several significant economic data releases. The CPI figures are particularly crucial, as they may influence the Federal Reserve’s future interest rate decisions. April inflation is projected at 3.7% year-over-year, the highest since September 2023, driven by rising energy prices amid the Iran conflict.

A higher-than-expected CPI reading would reinforce the Fed’s hawkish stance and support the USD, while a softer report could revive expectations of rate cuts ahead of the next policy meeting. This inflation data may prove pivotal in determining the direction of both interest rates and the dollar for the week.

Dollar (DXY) Technical Forecast

From a technical perspective, the immediate outlook for the DXY appears slightly bullish, as the recent decline to 97.80 attracted renewed buying interest. However, the performance on the daily chart indicates that the overall trend of the USD remains neutral to bearish.

This week, solid support is expected near the 97.60 level, which has been maintained in recent weeks. If this support fails, the index could potentially decline further toward the 97.00–96.80 zone. On the other hand, key resistance is noted at 98.55–98.60, and a sustained move above this range could lead to an increase toward the 99.00–99.10 levels.

 

Warning! This material is not intended as investment advice. Past performance data does not guarantee future returns. Investing in foreign currencies may affect your returns due to their fluctuations. Any transaction in securities may result in both profits and losses. The assumptions and expectations set forth in this material are only estimates that may not be accurate and may change depending on current economic conditions. These statements do not guarantee future returns.