The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, has risen for the third consecutive day, trading around 99.30 during Asian hours on Monday [1]. This upward movement is attributed to increased bets on an aggressive Federal Reserve (Fed) rate hike, with financial markets pricing in nearly an 87% probability of a quarter-point rate hike at the Fed's September meeting, up from 59% a week ago, according to the CME FedWatch tool [1].
The surge in rate hike expectations follows the release of hotter US inflation data. The US Consumer Price Index (CPI) rose 0.4% month-over-month in August, resulting in a 12-month increase of 3.4%, both figures aligning with market expectations [1]. The core CPI, which excludes food and energy prices, increased by 0.3% on a monthly basis, beating the forecast of 0.2% and the previous reading of 0.2% [1]. These inflation readings have reinforced expectations that the Fed will raise interest rates next week [1].
From a technical perspective, the Dollar Index Spot trades at 99.30, maintaining a bearish near-term bias as it remains below the longer-term 50-day Exponential Moving Average (EMA) at 99.63, while only marginally above the short-term nine-day EMA at 99.12 [1]. The 14-day Relative Strength Index (RSI) at 48.04 is just under the neutral 50 line, indicating subdued momentum [1]. Initial resistance is seen at the 50-day EMA, and a sustained break above this level would be needed to ease the prevailing bearish tone. Immediate support is at the nine-day EMA, with a daily close beneath this average likely to reinforce downside bias and open the door to further weakness in the Dollar Index Spot [1].
No forward-looking statements or analyst opinions beyond technical analysis and rate hike probabilities are provided in the article [1].
CONCLUSION
The US Dollar Index is experiencing upward momentum driven by increased Fed rate hike expectations following hotter-than-expected inflation data. While technical indicators suggest a bearish near-term bias, a break above resistance could shift sentiment. Market participants are closely watching the Fed's upcoming decision, which is expected to have a significant impact on the Dollar's direction.