The Dollar index has reached 101.30 and is testing 101.63–101.80 resistance near a two-month high, but its rally is losing momentum as Treasury yields and oil retreat. Three U.S. data releases this week, core PCE, ISM Manufacturing, and nonfarm payrolls, now need to confirm the tightening already priced into markets.
Yields and Oil Stop Pushing the Dollar Higher
DXY is pressing into the 101.63–101.80 resistance zone that marks the June and July highs, but shorter-term momentum has begun to flatten. Two forces behind the recent rally have eased: the 10-year Treasury yield has retreated after testing around 5.24% on Monday, and oil has also pulled back.
Neither move reverses the broader inflation-and-rates story. However, both remove the marginal support that had been pushing Federal Reserve expectations and the Dollar higher. Markets already price around a 70% probability of an October Fed hike, so this week's data need to validate that tightening rather than simply keep it alive.
Three Releases Carry the Fed Trade
Core PCE arrives Wednesday, with consensus expecting core inflation to accelerate from 0.2% to 0.3% m/m and from 3.3% to 3.4% y/y. A dovish surprise would instead be a return toward July's slower 0.2% core pace. Because markets already expect inflation to pick up, a 0.3% print would confirm persistence rather than shock markets, while a stronger reading would hand yields and the Dollar a fresh catalyst.
Thursday's ISM Manufacturing is expected to rise from 54.6 to 55.0, extending what is already a nine-month run in expansion territory, though New Orders fell 3.0 points and Backlog of Orders fell 3.2 points in August. Friday's nonfarm payrolls are seen at 90,000, down from August's 162,000, with unemployment unchanged at 4.1%. August's gain was more than five times the trailing twelve-month average, so a 90K print would look like partial normalization rather than a collapse, but a meaningful undershoot, especially with rising unemployment, would raise the larger dovish risk.
DXY Needs Confirmation to Clear Resistance
The technical picture mirrors the fundamental one. DXY is testing 101.63–101.80 resistance with daily RSI near 70. A convincing break above 101.80 would reopen the rally toward 102.87 and then 104.59. A retreat toward 100.70 — where the four-hour and daily 55 EMAs converge — would be the first warning sign, exposing 100.00 and then 98.60–98.68 below that.
Dollar bulls have largely priced the Fed. Now the data have to deliver.
Source: ActionForex
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