DOLLAR INDEX Slips After Weak Inflation Reading, While 100 Level Continues to Underpin Bulls

The U.S. Dollar Index regained some ground on Thursday after coming under pressure over the previous two sessions, as softer-than-expected June inflation readings, including both CPI and PPI data, prompted investors to scale back expectations for additional Federal Reserve tightening.

The index had slipped to a one-month low after breaking below trendline support at 100.40 on Wednesday, generating a short-term bearish signal. However, the decline stalled above the key 100.00 level, which combines psychological significance with the 38.2% Fibonacci retracement of the 97.44–101.55 advance, helping to preserve the broader bullish outlook.

From a technical perspective, the daily chart presents a mixed picture. Conflicting moving averages, weakening momentum indicators and a neutral RSI suggest a lack of clear direction in the near term. Nevertheless, the broader fundamental backdrop continues to favor the U.S. dollar.

Compared with its major Western peers, the U.S. economy remains relatively resilient and less vulnerable to rising energy costs, reinforcing the greenback’s appeal as a preferred safe-haven asset during periods of geopolitical uncertainty and elevated commodity prices.

Moreover, the softer inflation readings recorded in June were largely attributed to lower energy prices during the temporary ceasefire in the Middle East. With tensions between the United States and Iran escalating once again and concerns growing over renewed disruptions to shipping through the Strait of Hormuz, inflation risks are beginning to re-emerge as oil prices climb.

These factors help limit the scope for a deeper dollar correction, particularly while the index remains above the pivotal 100.00 support zone. A recovery above the recently broken trendline support would strengthen the near-term outlook and signal that the latest break lower was a false downside move.

For bullish momentum to regain traction, the index would need to extend its rebound above the 20-day moving average at 100.82, which would reinforce the positive signal and shift the near-term focus back toward higher levels.

Res: 100.48; 100.82; 101.12; 101.55
Sup: 100.12; 100.00; 99.50; 99.09