The US Dollar’s slight dip is linked to both political developments and the anticipation of upcoming economic data. Vice President Kamala Harris’s performance in the presidential debate, which is seen as a narrow victory over former President Donald Trump, may have some influence on market sentiment. However, the primary focus is on the upcoming US Consumer Price Index (CPI) report for August, which is expected to shape the Federal Reserve’s (Fed) decision on interest rates.
A softer-than-expected CPI could lead to a 50 basis point rate cut, while a stronger or steady reading might result in a smaller 25 basis point cut. This uncertainty has kept the US Dollar Index (DXY) trading within a narrow range, from 101.90 to 100.62.
Key technical levels include:
- Resistance at 101.90, which has been tested but rejected once already. A break above could push the index towards 103.18, with further resistance at the 55-day Simple Moving Average (SMA) at 103.40 and the 200-day SMA at 103.89.
- Support at 100.62, which has held strong in recent weeks. A break below this level could see the index fall to 99.58, with a potential downside target at 97.73.
The CPI report on Wednesday will provide crucial insights for the market, determining the size of the Fed’s rate cut and driving the next move for the US Dollar Index.
