U.S. Dollar Index meets 50-EMA support as markets brace for PCE inflation data
DXY dips before PCE report; 103.70 is key support
The U.S. Dollar Index (DXY) price is under renewed selling pressure on Friday, retreating toward a key support zone as traders anticipate the release of the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index.
On Thursday, the dollar index erased its weekly gains, reversing 0.54% from a fresh three-week high of 104.25. The decline, however, found support at the 50-period Exponential Moving Average (EMA) on the 4-hour chart, coinciding with the key 103.70 level where the week opened on Monday. This level now stands as a crucial test for further downside momentum.
U.S. Dollar Index price dynamics (March 2025). Source: TradingView.
Following Thursday’s dip, the dollar saw limited volatility throughout the Asian session on Friday, fluctuating between 103.85 and 103.95. However, the index began slipping again in early European trading, nearing 103.80. Despite the pullback, the dollar index remains within its bullish channel, and the 1-hour Relative Strength Index (RSI) is still hovering near the neutral 50 level, suggesting no immediate shift to bullish or bearish conditions.
PCE inflation forecast to support the U.S. Dollar bullish trajectory
The upcoming PCE inflation report at 12:30 GMT is likely to set the tone for the dollar’s next move. The core PCE Price Index, which excludes volatile food and energy prices, is expected to rise 0.3% month-over-month in February, maintaining the same pace as January. Year-over-year, core inflation is projected to tick up to 2.7% from 2.6%, while headline PCE inflation is forecast to remain at 2.5%.
Given the Federal Reserve’s recent emphasis on inflation trends, traders will closely watch whether the data reinforces expectations of rate cuts later this year. Any upside surprise in inflation could support the dollar above 103.70. Hence, the broader bullish structure could remain intact, with resistance seen at 104.25 in view. On the other hand, a softer reading may add to the ongoing downside pressure, leading the dollar index to break below 103.70 and head toward 103.50 and 102.80. As market participants await the PCE data, volatility is expected to pick up in the coming sessions.
The US Dollar Index retraced amid concerns over slow US economic growth due to President Trump's new 25% auto tariffs. Support from the 50 and 100-hour EMAs kept the bullish trend intact.
