The US Dollar (DXY Dollar Index) is on track for another weekly decline ahead of the highly-anticipated Consumer Price Index (CPI) report. This could be the worst 5-day performance since July. The daily chart also indicates a bearish trend for the currency. The upcoming CPI report is expected to show weakening inflation, with the headline inflation dropping to 3.6% y/y and the core CPI dropping to 4.1% y/y. This slowdown in inflation could support the cautious stance of the Federal Reserve and put downward pressure on Treasury yields, leading to a decline in the US Dollar.
The lag effect of slowing rental property prices is likely to continue affecting core CPI in the coming months, further pressuring core inflation lower. This aligns with the recent cautious commentary from the Federal Reserve and the decline in Treasury yields. As stock markets rise and demand for safety decreases, the US Dollar faces less demand and depreciates. The technical analysis of the DXY Dollar Index daily chart suggests a potential reversal and key support at the 104.69 level.
Overall, the US Dollar is facing a weekly pullback ahead of the CPI report, which is expected to show weakening inflation. This supports the cautious stance of the Federal Reserve and could lead to a further decline in the US Dollar. However, the currency’s performance will ultimately depend on market reactions to the CPI data and other factors influencing the global currency markets.
