The US Dollar is sitting in a technical bundle of key structures that has something for both the bulls and bears ahead of the release of US inflation data and the final Federal Reserve meeting of the year.
Traders are looking for signs of a Fed pivot, i.e., for its policy outlook to change course from its currently contractionary (tight) monetary policy to expansionary (loose).
A Fed pivot typically happens when economic conditions have fundamentally changed in such a way that the Fed can no longer continue its prior policy stance and the US Consumer Price Inflation data is used as a primary gauge in that respect. In fact, the DXY's biggest daily drop and second-largest daily gain in 2022 have come on the back of prior CPI data.
The Fed is widely expected to hike the funds rate by 50 basis points (bp) on Wednesday, after four consecutive 75 bp hikes. If the data comes in hotter than expected, this will be problematic for the Fed eager to slow the pace of tightening and potentially weigh on risk assets and thus lead to a stronger US Dollar.
The headline is expected at 7.3% YoY vs. 7.7% in October, while the core is expected at 6.1% YoY vs. 6.3% in October. Last week, the Producer Price Index came in higher than expected, raising concerns that inflation is likely to prove to be much stickier than the markets are pricing.
DXY technical analysis
The trendline was broken and the bulls are on the back side of it. If the data comes in hot, a move beyond the 50% mean reversion resistance near 1.05.65 could spell an upside correction continuation scenario for the near future. On the flip side, 103.00 will be a key target for the remaining weeks of the year should a Fed pivot be priced in even further.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Australian Dollar falls due to market caution ahead of US NFP
The Australian Dollar remains subdued against the US Dollar for the second consecutive day on Friday. The AUD/USD pair holds losses following the release of China's Trade Balance data. Traders shift their focus on the US Nonfarm Payrolls report later in the North American session.
EUR/USD tests fresh tops above 1.0870 on NFP
The selling bias in the US Dollar gathers extra pace on Friday after the US economy created fewer jobs than initially estimated in February, sending EUR/USD to the area of new highs around 1.0870.
Gold remains bid above $2,900 after US Payrolls
Gold prices manage to leave behind Thursday’s pullback and revisits the area of $2,920 per troy ounce in the wake of the publication of the US labour market report in February.
White House Crypto Summit could boost adoption across financial markets: Binance exec Rachel Conlan
US President Donald Trump signed an executive order for a Strategic Bitcoin Reserve on Friday, shifting industry leaders’ focus from regulation to adoption. Within just over six weeks of his term, the President is set to host the first Crypto Summit, hosting industry giants and executives from the ecosystem.
February CPI preview: The tariff winds start to blow
Consumer price inflation came out of the gate strong in 2025, but price growth looks to have cooled somewhat in February. We estimate headline CPI rose 0.25% and the core index advanced 0.27%. The moderation in the core index is likely to reflect some giveback in a handful of categories that soared in January.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.