US Dollar Index Price Forecast: DXY holds above 101.70 pivotal support ahead of US CPI

DXY attracts sellers for the second straight day amid the recent pullback in US bond yields.
Hawkish Fed expectations and geopolitical uncertainties limit losses for the safe-haven USD.
The technical setup further warrants caution for bears as focus remains on the US CPI report.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, drifts lower for the second straight day on Wednesday, retreating further from its highest level since April 2025, touched on the first day of this week. The index, however, holds above the 102.00 mark through the early European session as traders keenly await the release of the US Consumer Price Index (CPI) report, due later today.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Apart from this, the US Producer Price Index (PPI) on Thursday and US Federal Reserve (Fed) Chair Kevin Warsh's speech on Friday will be looked to for more cues about the future policy outlook, which, in turn, will influence the near-term DXY price dynamics. Heading into the key data/event risks, the recent pullback in US bond yields prompts traders to lighten their bullish bets following a strong rally from the September monthly swing low.

However, the growing acceptance that the US central bank will raise borrowing costs again in December, along with geopolitical uncertainties stemming from escalating conflicts in the Middle East, helps limit the downside for the safe-haven US Dollar (USD). This makes it prudent to wait for strong follow-through selling before confirming that the DXY has topped out in the near-term and positioning for any meaningful corrective decline.

From a technical perspective, the index holds a bullish near-term bias above the 101.65-101.70 horizontal resistance breakpoint. Moreover, the Moving Average Convergence Divergence (MACD) indicator remains in positive ground with a modest reading of 0.02, suggesting that upward momentum is still present. Meanwhile, the Relative Strength Index (RSI) at 64.81 stays in positive territory but remains shy of extreme overbought conditions.

Hence, any further weakness below the 102.00 mark is more likely to attract fresh buyers near the 101.70-101.65 resistance-turned-support. A daily close back under it would hint at a deeper corrective phase as momentum indicators retreat from elevated levels and lose some intensity compared with prior sessions. Meanwhile, a sustained hold above this zone keeps buyers in control, warranting some caution for aggressive bearish traders.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

DXY daily chart

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.