The US dollar is brewing a breakthrough on the technical side, and the CPI data will ignite market sentiment
2025-08-12 19:59:46
Before the U.S. market opened on Tuesday (August 12), the U.S. dollar index continued its volatile consolidation pattern, stabilizing after a cumulative 0.4% gain over two consecutive trading days. The market is currently cautious, with traders focusing on the upcoming U.S. CPI inflation data, which will provide important guidance for the Federal Reserve's monetary policy and may determine the short-term direction of the U.S. dollar.
The market generally expects inflationary pressures to intensify in July, with headline inflation projected to rise to 2.8% annually from 2.5% in June, while core inflation could hit a five-month high of 3%. Against this backdrop, traders remain wary of data that exceeds expectations, as this could confirm that Trump's tariff hikes are filtering through to end-consumer spending, thereby weakening market expectations for a September rate cut by the Federal Reserve. Currently, the market is pricing in a September rate cut at nearly 90%, and any bullish inflation data could provide additional support for the US dollar.
Previously released US macroeconomic data showed a weakening labor market, sparking mixed calls from Federal Reserve officials for interest rate cuts to stimulate the economy. Meanwhile, Trump is expected to nominate loyal doves to fill the vacancies of Board Member Kugler and Chairperson Powell, further reinforcing market hopes for a shift in Fed policy toward easing. Conversely, if inflation data falls short of expectations, it would ease market concerns about the impact of tariffs and pave the way for a September rate cut by the Fed. This scenario could boost risk appetite and exert downward pressure on the US dollar.
Technical aspects:
The 60-minute chart shows the US Dollar Index trading within a relatively narrow range between 98.4580 and 98.6650, demonstrating a typical sideways consolidation pattern. The Bollinger Bands indicator shows the exchange rate fluctuating near its middle band, with a clear trend of convergence, suggesting the market is at a critical juncture in determining direction. Upward resistance is concentrated at 99, corresponding to the previous high and constituting a significant technical resistance level. Downward support lies around 98.0199, forming a dual support pattern with the previous low of 97.9270.
Regarding the MACD indicator, the fast and slow lines are entangled near the zero axis, and the MACD histogram shows a relatively balanced bullish and bearish trend, lacking a clear directional signal. Notably, the difference between the DIFF and DEA lines has narrowed to 0.0515, indicating weakening momentum and the possibility of a larger directional breakthrough brewing.
The Relative Strength Index (RSI) is trading at 60.7225, indicating a relatively strong trend. This level is neither overbought nor oversold, providing ample room for further market action. The RSI's flat trend further confirms the market's hesitant mood.
Market sentiment observation:
Current market sentiment is clearly characterized by a wait-and-see approach, with traders generally adopting a cautious stance awaiting key data guidance. The low volatility of the US dollar index reflects the market's intense focus on inflation data, a state of inactivity that often signals the impending arrival of a significant breakthrough. From a capital flow perspective, there is a delicate balance between the safe-haven nature of US dollar assets and yield expectations, and inflation data will directly influence the direction of this balance.
Traders are divided over the Fed's policy path, with both dovish and hawkish views coexisting. This uncertainty has further exacerbated the exchange rate's sideways trading pattern. It's worth noting that shifts in global risk appetite will also have a significant impact on the dollar's performance, especially after the release of inflation data, which could lead to a significant shift in market sentiment.
Market outlook:
Bullish Outlook: If inflation data exceeds expectations, it will reinforce expectations that the Federal Reserve will maintain a relatively tight policy, and the US dollar index is expected to break through the 99 resistance level. In this scenario, the dollar's safe-haven properties will be further enhanced, especially amid global economic uncertainty. Technically, a successful breakout above the upper limit of the current consolidation range will initiate a new uptrend, with the target at 100 being the psychological level.
Bearish Outlook: Conversely, if inflation data is mild or below expectations, it will increase market confidence in the Fed's interest rate cuts, and the US dollar index may break through the 98.0199 support level and further decline to the 97.7000-97.8000 area. Under the expectation of loose monetary policy, the relative appeal of the US dollar will weaken, and emerging market currencies and commodity currencies may gain more attention.
The market generally expects inflationary pressures to intensify in July, with headline inflation projected to rise to 2.8% annually from 2.5% in June, while core inflation could hit a five-month high of 3%. Against this backdrop, traders remain wary of data that exceeds expectations, as this could confirm that Trump's tariff hikes are filtering through to end-consumer spending, thereby weakening market expectations for a September rate cut by the Federal Reserve. Currently, the market is pricing in a September rate cut at nearly 90%, and any bullish inflation data could provide additional support for the US dollar.
Previously released US macroeconomic data showed a weakening labor market, sparking mixed calls from Federal Reserve officials for interest rate cuts to stimulate the economy. Meanwhile, Trump is expected to nominate loyal doves to fill the vacancies of Board Member Kugler and Chairperson Powell, further reinforcing market hopes for a shift in Fed policy toward easing. Conversely, if inflation data falls short of expectations, it would ease market concerns about the impact of tariffs and pave the way for a September rate cut by the Fed. This scenario could boost risk appetite and exert downward pressure on the US dollar.
Technical aspects:
The 60-minute chart shows the US Dollar Index trading within a relatively narrow range between 98.4580 and 98.6650, demonstrating a typical sideways consolidation pattern. The Bollinger Bands indicator shows the exchange rate fluctuating near its middle band, with a clear trend of convergence, suggesting the market is at a critical juncture in determining direction. Upward resistance is concentrated at 99, corresponding to the previous high and constituting a significant technical resistance level. Downward support lies around 98.0199, forming a dual support pattern with the previous low of 97.9270.
Regarding the MACD indicator, the fast and slow lines are entangled near the zero axis, and the MACD histogram shows a relatively balanced bullish and bearish trend, lacking a clear directional signal. Notably, the difference between the DIFF and DEA lines has narrowed to 0.0515, indicating weakening momentum and the possibility of a larger directional breakthrough brewing.
The Relative Strength Index (RSI) is trading at 60.7225, indicating a relatively strong trend. This level is neither overbought nor oversold, providing ample room for further market action. The RSI's flat trend further confirms the market's hesitant mood.
Market sentiment observation:
Current market sentiment is clearly characterized by a wait-and-see approach, with traders generally adopting a cautious stance awaiting key data guidance. The low volatility of the US dollar index reflects the market's intense focus on inflation data, a state of inactivity that often signals the impending arrival of a significant breakthrough. From a capital flow perspective, there is a delicate balance between the safe-haven nature of US dollar assets and yield expectations, and inflation data will directly influence the direction of this balance.
Traders are divided over the Fed's policy path, with both dovish and hawkish views coexisting. This uncertainty has further exacerbated the exchange rate's sideways trading pattern. It's worth noting that shifts in global risk appetite will also have a significant impact on the dollar's performance, especially after the release of inflation data, which could lead to a significant shift in market sentiment.
Market outlook:
Bullish Outlook: If inflation data exceeds expectations, it will reinforce expectations that the Federal Reserve will maintain a relatively tight policy, and the US dollar index is expected to break through the 99 resistance level. In this scenario, the dollar's safe-haven properties will be further enhanced, especially amid global economic uncertainty. Technically, a successful breakout above the upper limit of the current consolidation range will initiate a new uptrend, with the target at 100 being the psychological level.
Bearish Outlook: Conversely, if inflation data is mild or below expectations, it will increase market confidence in the Fed's interest rate cuts, and the US dollar index may break through the 98.0199 support level and further decline to the 97.7000-97.8000 area. Under the expectation of loose monetary policy, the relative appeal of the US dollar will weaken, and emerging market currencies and commodity currencies may gain more attention.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
