US Dollar Index: Supported but capped on topside – OCBC

OCBC strategist Christopher Wong highlights that hot United States (US) Consumer Price Index (CPI) and Producer Price Index (PPI) pushed Treasury yields higher, but US Dollar Index (DXY) gains lacked strong follow-through, suggesting much inflation risk is already priced. Wong expects the Dollar to stay supported on dips, with a cleaner topside break needing stronger US data, clearer second-round inflation signs or deeper risk-off. Technicals show mild bullish momentum, with resistance around 98.70–99 and support near 98.10–97.50.

Inflation data backstop Dollar dips

"USD ticked higher overnight. Following the upside surprise in CPI, April PPI also came in hot, rising 1.4% m/m and 6.0% y/y, with price pressures visible across both goods and services. The data reinforced concerns that the recent oil shock is feeding into broader pipeline inflation and kept markets leaning toward a more hawkish Fed reaction function."

"UST yields moved higher and DXY briefly extended gains, but follow-through was limited, suggesting markets may have already priced a fair amount of inflation risk after the CPI release."

"For now, USD may remain supported on dips but a cleaner topside break may require either stronger evidence of second-round inflation effects, more explicit Fed pushback, stronger US data print or a deeper deterioration in risk sentiment. Data tonight brings initial jobless claims, import/export price index and retail sales."

"Kevin Warsh has been confirmed as the next Fed Chair. While he has previously leaned toward a Fed rethink and lower rates over time, the timing is tricky with CPI and PPI both printing hot, oil still elevated and markets adding back some Fed hike risk. This makes it harder for an early dovish pivot to gain traction. For now, the uncertainty around his first policy signals may keep USD supported on dips."

"DXY rose; last seen at 98.50 levels. Daily momentum showed tentative signs of turning mild bullish while RSI rose. 2-way risks likely to persist. Resistance at 98.70 (38.2% fibo), 99 levels (50 DMA). Support at 98.10 (50% fibo retracement of 2026 low to high), 97.50/60 levels (double bottom, 61.8% fibo retracement of 2026 low to high)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)