U.S. Dollar Index retreats below 102 amid mixed trade sentiment and CPI concerns
Dollar index drops below 102 ahead of key U.S. CPI report.
The U.S. Dollar Index (DXY) saw a sharp surge following President Trump’s announcement of a 90-day tariff pause on 56 countries and the European Union.
The pause has been perceived as a potential de-escalation of trade tensions, which temporarily boosted market sentiment. This provided a basis for the dollar index to rally and test the 50 EMA resistance at 102.80, a key level that proved difficult to break through.
As a result of the resistance, this surge was short-lived. As of today, Thursday, April 10, the DXY has fallen back below 102.00, trading at 101.55, a decline of over 1% today. The price is now approaching a four-day low as it nears a critical support at 101.46. The RSI on both the daily and 4-hour charts are in bearish territory, reinforcing the outlook for further downside in the short term.
U.S. dollar price dynamics (April 2025). Source: Tradingview
CPI data could shift the Fed stance and potentially weaken the dollar
As the dollar index retreats lower, the primary focus for traders now shifts to the upcoming U.S. Consumer Price Index (CPI) report, set to be released on Thursday at 12:30 GMT. The March CPI figures are expected to show a slight cooling of inflation, with the annual rate forecasted to drop from 2.8% in February to 2.6%. Core CPI, which excludes food and energy, is expected to ease to 3% from 3.1%. These figures will be closely scrutinized, as they could heavily influence expectations surrounding Federal Reserve policy and future interest rate decisions.
If the CPI data comes in below expectations, the outlook for the dollar could weaken further, particularly if it fuels speculation that the Fed might take a more dovish stance. On the other hand, if inflation proves to be stickier than anticipated, it could provide the dollar with a brief respite, as higher inflation might prompt the Fed to act more aggressively.
In conclusion, the U.S. Dollar Index experienced significant resistance at 102.80 and has retreated below 102.00. A break below 101.46 could signal a further downside. However, Thursday's CPI release will be the major catalyst influencing the dollar's trajectory in the near term.
The U.S. Dollar Index broke below a bullish trendline, dropping to a three-day low. Technical weakness and geopolitical stress led to the decline.
