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The US Dollar Index (DXY) has been under pressure over the past few weeks as investors await the upcoming Fed rate decision and US inflation data. It traded at $104.98, its lowest level since August 11. It has crashed more than 8.45% from this year’s high.
US Inflation and the Fed Decision
Over the past few weeks, the DXY index has been in a strong bearish trend as investors focus on a possible Fed focus. Therefore, this week will be an important one for the greenback due to events in the US, UK and EU.
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The US will release the latest Consumer Price Index (CPI) data on Tuesday. Economists expected the data to show that consumer inflation eased to 7.3% in November from 7.7% in October. Excluding volatile food and energy prices, core inflation is expected to ease to 6.2%. It contains details on US inflation Article.
The latest US inflation data comes a day ahead of the latest Federal Reserve decision. Economists expect the central bank to raise interest rates modestly. The main estimate is a rise of 0.50%.
Hence, the interest rate hike will not have a major impact on the US dollar. Instead, the main stimulus will be the central bank’s announcement of future hikes. A more hawkish tone could lead to further upside for the DXY index.
BoE and ECB decisions
The US dollar The code will react Forex news by the ECB and the BoE. Unlike the central bank, these banks are more vulnerable to a recession in the UK. Economists expect the ECB to hike by 75 basis points and the BoE by 50 basis points.
These rate results are important as the Euro and Sterling are the two biggest DXY components. However, the main catalyst for DXY will be the central bank’s decision. Data released on Monday showed the UK economy had avoided recession as it expanded 0.5%.
US Dollar Index Forecast
The 1D chart shows that the DXY index has been on a strong selloff over the past few months. As it falls, it moves down the ascending channel shown in green. When the Relative Strength Index (RSI) moves close to the oversold level, selling has moved below the moving average. The Sunday Momentum Oscillator is below the zero neutral point.
Therefore, the US Dollar Index will continue to fall as sellers target the next key support at $100. A move above the resistance at $107 will invalidate the bearish view.
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