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Will the U.S. dollar index "boil a frog in warm water"?
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Hello everyone, today XM Forex will bring you "[XM official website]: Will the U.S. dollar index "boil a frog in warm water"?". Hope this helps you! The original content is as follows:
On Friday (October 24), the U.S. dollar index was around 99 during the European time. The market fluctuated repeatedly around the 99 mark, with moderate volatility and no unilateral inertia. The disk structure shows that both bulls and shorts have their grasp: on the one hand, macro data is expected to point to marginally sticky but overall controllable inflation; on the other hand, the easing path is still advancing, causing a pull between the interest rate advantage and the hedging premium.
Fundamentals
Barclays expects the core CPI in the United States in September to be 0.36% month-on-month, and the headline CPI to be 0.43% month-on-month. It emphasized that data collection in September was www.xmhouses.completed before the risk of shutdown and the quality would not be affected; if the shutdown is extended, the collection and quality of October data may be disturbed. Structurally, core www.xmhouses.commodities have become dominant, with a forecast of +0.4% month-on-month, reflecting the acceleration of tariff transmission; core services are expected to slow to 0.3%, with accommodation-related sub-items bringing relief. From this, the core PCE is about 0.31% month-on-month, 9 basis points higher than August.
Looking ahead to the end of the year and the beginning of next year, Barclays Bank believes that tariff transmission will remain "stable but high", making it likely that core CPI will maintain an "integer" monthly rate of 0.4% in the www.xmhouses.coming months until January 2026. Its retrospective experience says that tariff-related price increases are currently around 40%. As a result, core CPI may rise to 3.5% year-on-year in December this year, and then fall back to 2.7% in December 2026. Under this inflation track, the Federal Reserve still has room to continue cutting interest rates this month and December, as private sector employment and consumption have not deteriorated significantly.
In contrast, Citigroup’s month-on-month forecast for core CPI in September is 0.28%. The narrative is still that "commodities are slightly stronger and services continue to slow down (especially accommodation)." On the www.xmhouses.commodity side, seasonalityIt may push up the short-term strength of sub-sectors such as automobiles; on the service side, the unexpected strength in landlord-equivalent rent in August is not sustainable, and accommodation inflation is likely to fall along the trend of newly signed leases and house prices falling. Citi has not factored in the recent increase in tariffs in its base scenario, but sees this as an upward risk early next year; if an additional 100% high tariff is implemented from November 1 and continues for a period of time, prices may even rise passively through "shortage" rather than "direct transmission." In terms of wages, referring to the Atlanta Fed wage tracker, wage increases for those who remain employed are showing signs of cooling, indicating that the “compensatory increases” in wages over the past two years are slowing down, which provides conditions for a subsequent decline in service inflation. Citi therefore still supports the Federal Reserve to continue cutting interest rates during the year and continue next year.
The differences between the two institutions focus on the "3 prefix" and "2 prefix" of the core monthly rate, but in terms of direction, they both believe that inflation is becoming moderate and does not hinder the easing path. This www.xmhouses.combination of "still sticky inflation and looser policies" usually has a phased hedging effect on the U.S. dollar index: if the market is more concerned about the decline in nominal and real interest rates, the U.S. dollar will be under pressure; if it is more worried about secondary inflation and supplementary increases caused by tariff transmission, the U.S. dollar's safe haven and premium www.xmhouses.compensation will be repriced.
Technical aspect:
The daily chart shows that the upper track of Bollinger Band is 99.5838, the middle track is 98.3668, and the lower track is 97.1498, with a bandwidth of about 2.43, which is at a medium level. The price is currently running between the middle rail and the upper rail, about 0.56 from the upper rail and about 0.66 above the middle rail, showing a "strong consolidation above the central axis." Technically, the key anchor points are: high point 100.2599, recent high point 99.5549; low point 96.3729 and 96.2109.
MACD(26,12,9) parameters show DIFF0.2620, DEA0.2442, and the column value is 0.0357. The kinetic energy is positive but the intensity is limited, and it tends to be "moderately long rather than accelerating the upward attack." The RSI is located at 58.0531, which is in the bullish zone "below slightly overbought", emphasizing that trend and structural divergence have not yet appeared.
www.xmhouses.comprehensive interpretation: The Bollinger middle rail 98.3668 forms a dynamic support, and the upper rail 99.5838 and the historical point 99.5549 form a "merged resistance zone"; if the volume breaks through and the upper rail is firmly established, then there are conditions to initiate a backtest to 100.2599; if it falls back below the middle rail, the lower rail support of 97.1498 will be tested. The shape is more like "the upper edge of the box with unbroken upper edge is backtested repeatedly", and there is no accelerated expansion of the effective trend line yet.
Outlook:
Short-term (next 1-2 weeks): If the CPI falls near the 0.28% mentioned by Citi, and services continue to cool down, the U.S. dollar index may do a "pull back - try again - pull back again" rhythm around the Bollinger mid-track, with the core range of 98.37-99.58. Upward requires a kinetic energy breakthrough, and downward depends on the effectiveness of the mid-track backtest. If the data is closer to Barclays' 0.36%, and the market increases its weight on tariff transmission, the U.S.The Yuan is expected to try to "shoot" above 99.58 in the short term, but it is necessary to observe whether the histogram can expand to avoid a "false breakthrough".
Summary
The U.S. dollar index is now standing in the "critical zone" near 99. Fundamentally, inflation is still sticky, but service slowdowns and slowing wages provide a buffer for easing; technically, prices are at the "half slope" between the middle track and the upper track, with MACD and RSI pointing to "strong but not aggressive." If it breaks above 99.58 and forms a resonance between volume and kinetic energy, 100.26 is not out of reach; if it falls below 98.37, you need to be wary of the downside risk of testing 97.15
The above content is about "[XM official website]: Will the U.S. dollar index "boil a frog in warm water"?". It is carefully www.xmhouses.compiled and edited by the XM foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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