U.S. Dollar Index (DXY) into Core CPI — key levelsContext (macro)
PPI is upstream; CPI is what the market prices. Core CPI at 08:30 ET (14:30 SAST) will set the near-term path for the USD, UST yields, gold, and risk assets. The tape is positioned for a directional move outcome depends on whether core inflation is softer, in-line, or hot.
Daily DXY chart
Structure: An inverse head-and-shoulders completed into late July with a clear break of structure. Since then, price has flagged back inside the prior value area in a descending channel, sitting mid-range.
Range: Roughly 97.3–98.6 is the active box.
Liquidity markers:
Swing low: ~97.1–97.3 (recent liquidity sweep).
Swing high: ~100.0–100.5 (unresolved liquidity from July spike).
Bias from structure: Post-break bullish continuation is favoured if the channel resolves up, but repeated supply above 98.5 means confirmation matters.
Levels that matter:
Support: 97.30–97.40 (range floor). Beneath that: 97.10, then 96.60 (the “head” low).
Resistance: 98.40–98.60 (range cap). Above: 98.90–99.10 (channel top/throw-over), then 100.0–100.5 (swing-high liquidity).
Event-driven scenarios (Core CPI 08:30 ET / 14:30 SAST):
Soft CPI (sub-consensus core)
Reaction path: USD offered → DXY breaks 97.30 → 97.10 test; follow-through opens 96.60.
Confirmation: A 4H close below 97.30 that fails to reclaim on retest.
Cross-asset: UST yields down, gold up, risk bid; EUR, GBP, commodity FX supported; USDJPY heavy.
In-line CPI (near consensus)
Reaction path: First move likely fades; range persists 97.8–98.2 with whipsaws. Market waits for next catalyst (Fed speak/data).
Tactics: Fade extremes of the box until a daily close breaks 97.30 or 98.60.
Hot CPI (above consensus core or sticky services)
Reaction path: USD squeezes → clean break and hold above 98.60 → attack 98.90–99.10. Sustained acceptance above 99.10 puts 100.0–100.5 back in play.
Confirmation: Daily close above 98.60, followed by shallow pullbacks that hold former resistance as support.
Cross-asset: UST 2s/10s yields up, gold pressured, risk off; EUR/GBP slip; USDJPY supported with yields.
Trading plan logic (not advice):
Bullish continuation trigger: Daily close > 98.60, then hold 98.40–98.60 on retest. Targets 98.90–99.10, extension 100.0–100.5.
Bearish breakdown trigger: 4H close below 97.30 and failed reclaim. Targets 97.10 then 96.60.
Invalidations: For longs, a shove back inside the channel that loses 98.10 after a breakout. For shorts, inability to hold below 97.30 within 1–2 sessions post-break (bear trap risk around CPI).
Why this setup matters:
We’ve got compression inside a descending channel parked on prior value. CPI is the release valve. Don’t anchor on the first spike; wait for acceptance beyond 98.60 or 97.30 to avoid getting chopped.
