Traders lack a clear judgment on the Federal Open Market Committee's (FOMC) policy path in September, with current market pricing indicating a 50/50 probability of a rate hike or no rate hike; the dollar index has shown signs of bottoming out; if the CPI data is strong, it will further boost expectations of a September rate hike, which would be beneficial for the dollar. Despite Warsh's previous hawkish stance, stating his commitment to pushing inflation back to the 2% target, three members of the Federal Open Market Committee (FOMC) directly contradicted the majority opinion, advocating for an immediate interest rate hike to curb inflation. This week's CPI data will be the first to validate which of the two factions within the FOMC has a more accurate assessment of the current economic situation. Following last week's weaker-than-expected non-farm payroll data, the current pricing in the federal funds rate futures market indicates a near 50% probability of a rate hike at the Fed's September meeting. Clearly, the market is completely uncertain about the Fed's policy direction next month, and Warsh's preference for reducing public communication within the Fed has exacerbated this confusion. Nick Timiraos, a well-known Fed insider for the Wall Street Journal, commented: "If this CPI data is strong, Warsh will have to deliver on his tightening stance, which he failed to convey through verbal statements last month, with actual rate hikes." However, readers should note that the market will also see another set of CPI data and a non-farm payroll report before the next FOMC meeting on September 16th. Therefore, this CPI data alone is insufficient to definitively determine the Fed's final decision. As is well known, the core inflation indicator that the Federal Reserve uses when formulating monetary policy is the core personal consumption expenditures price index (core PCE); however, for traders, the CPI data is just as important—the CPI is released several weeks earlier than the core PCE. As mentioned earlier, inflation has stubbornly remained above the Fed's 2% policy target for five consecutive years, and various leading economic indicators suggest that inflation may have further room to rise. Looking at the "Prices Paid Index" sub-index of the Manufacturing Purchasing Managers' Index (PMI) in the chart above, this indicator remained stable last month; however, based on historical correlations, it still suggests upward pressure on overall inflation. If the CPI data is significantly stronger this time, Warsh will face a dilemma, having to consider a rate hike in September; conversely, if the inflation data is moderately weak, it will buy the Federal Reserve some buffer time and give Warsh a policy adjustment window for his keynote speech at the Jackson Hole Economic Symposium at the end of the month. Regardless of the data's quality, this CPI data will trigger significant market volatility, and all trading participants need to be prepared for highly volatile market conditions. Technical Analysis (US Dollar Index Daily Chart Source: FX678) Shifting Towards the Global Reserve Currency: After a sharp decline at the end of July, the US Dollar Index has now shown initial signs of bottoming out. In August, the index found support twice at the 99.40 level, while the 14-period Relative Strength Index (RSI) formed a bullish divergence. This technical pattern suggests that bearish momentum is weakening, and if CPI inflation data exceeds expectations, the dollar is likely to complete a phase of bottoming out and reversal. Conversely, if CPI data weakens, the dollar will come under downward pressure; once the index breaks below the 99.40 support level, it will likely test the 61.8% Fibonacci retracement level of 99.20 in the short term, and further target the 99 psychological level.