- The US Dollar Index (DXY) is at a critical technical crossroads as CPI spike looms
- Markets are bracing for a massive 1.0% surge in March Headline CPI
- While the Headline CPI is forecasted to hit a two-year high of 3.4%, Core CPI is expected to remain stable at 0.2%, though the closure of the Strait of Hormuz presents a significant upside risk to food inflation
Market participants are eyeing the US Dollar Index (DXY) as it hovers above a key confluence area of support around the 98.50 mark.
The index has struggled to gain any traction since the gap down on Tuesday April 7, following the ceasefire announcement between the US and Iran. The optimism around a ceasefire remains fragile though as developments since the announcement hint at further escalation and a resumption of the war.
Thus the risk premium attached to markets remains firmly in play and this is evidenced by the lack of continuation to the moves which occurred just after the ceasefire announcement. Since then many assets have hovered in a tight range with Gold declining to levels prior to the ceasefire announcement overnight.
Oil prices on the other hand remain significantly higher than the pre-war levels and are once again breaching the $100/barrel mark.
The US dollar had benefitted from a risk off environment prior to the ceasefire and maybe get a renewed bid if the situation remains tense. For now though, the DXY remains caught in a tight range.
US Dollar Index (DXY) Daily Chart, April 9, 2026
Source: TradingView.com (click to enlarge)
Looking at the technical picture, The US Dollar Index (DXY) is at a critical crossroads.
The index has recently snapped its ascending channel, signaling a shift in market structure. We are now seeing a potential retest of the 99.50 and 100.00 psychological handles from below, which has flipped from support to resistance.
- Key Support: Immediate focus is on the confluence of the 100-day SMA (98.63) and the 200-day SMA (98.49). A daily close below this “Golden Cross” zone would confirm the trend reversal.
- Key Resistance: Bulls need a move back above the 100.00 mark and the recent swing high of 100.61 to invalidate the bearish pattern.
With the RSI softening toward the 40 level, the path of least resistance appears to be lower.
Conversely, if the DXY fails to record a daily candle close below the “Golden Cross” zone and 200-day MA then a retest of the 99.50 zone and potentially the psychological 100.00 level will increase in probability.
US GDP, PCE data fail to inspire a move. Will US CPI be the catalyst?
The latest batch of economic data paints a challenging picture for the U.S. economy: a “stagflationary” cocktail of cooling growth, shrinking personal incomes, and an unexpected climb in jobless claims.
However, it was the inflation data that stole the spotlight. The Commerce Department’s February Personal Consumption Expenditures (PCE) report—the Federal Reserve’s preferred metric—landed exactly on the mark. Headline prices climbed 0.4% for the month, a slight heat-up from January’s 0.3%, while maintaining a 2.8% annual pace.
The Core Reality
Core PCE, which filters out the noise of food and energy, also matched forecasts with a monthly rise of 0.4% and an annual print of 3.0%. While these figures met expectations, two major caveats remain:
- The Target Gap: Inflation remains stubbornly well above the Fed’s 2% mandate.
- The Lag Effect: This data captures the pre-war environment. It does not yet account for the massive energy price spike triggered by the conflict with Iran which leaves the March outlook significantly more hawkish.
Source: LSEG
US CPI preview
Heading into tomorrow’s CPI release which would provide a first glance at the potential impact of rising Oil prices, markets are bracing for a massive 1.0% surge in March CPI, the sharpest monthly jump since the 2022 energy crisis following the invasion of Ukraine. This spike is almost entirely a “pain at the pump” story; gasoline prices are projected to drive a staggering 12.5% increase in energy costs.
While the headline figure is set to jump, the underlying trend remains more subdued:
Core CPI (Ex-Food & Energy): Expected at a moderate 0.2%, matching February’s pace.
Annual Headline Inflation: Forecasted to leap from 2.4% to 3.4%, hitting a two-year high.
Annual Core Inflation: Projected to tick up slightly to 2.6%.
For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)
The Risk Factor: Although food is expected to rise by a modest 0.3%, the ongoing closure of the Strait of Hormuz poses a significant upside threat. Disruptions to global fertilizer supplies could soon turn “moderate” food inflation into a much larger headache for the Fed.
In short, energy is doing the heavy lifting here, and while core inflation looks stable for now, the geopolitical ripple effects are just beginning to surface.
Such a move in the CPI print should in theory provide support for the US Dollar and could lead to a rebound.
However, the risk off/risk on sentiment dynamics remain the primary at present and thus any developments in the Middle East could still overshadow the CPI release.
Stay nimble.
