The recent Consumer Price Index (CPI) data showed that inflation was much higher than expected. The headline CPI rose from 2.4% in September to 2.6% in October, while the core CPI remained at 3.3%.
Therefore, analysts expect the Fed to maintain a fairly hawkish tone in the next meeting in December. Instead of cutting, they expect that the bank will hold rates steady during the month and point to at least three cut in 2025.
US government bond yields have slipped ahead of the upcoming Fed minutes. The ten-year yield fell to 4.28%, down from this month’s high of 4.50%. Similarly, the US 30-year yield dropped from 4.68% to 4.47%.
US consumer confidence and PCE data
The other key catalyst for the US dollar index will be the upcoming US consumer confidence data.
Economists expect the data to show that the consumer confidence rose from 108.7 in October to 112 in November. A high confidence figure will be a sign that the American economy is doing well since their spending is the biggest part of the economy.
Consumer confidence has likely increased because of the recent trends on inflation and the labor market.
The US will then release the second estimate of third-quarter GDP data on Wednesday. The market, based on the first estimate, expects the data to show that the economy expanded by 2.8% in the third quarter.
Meanwhile, the PCE data is expected to come in at 2.2%, higher than the previous 2.1%. PCE is an important inflation report that looks at price changes in rural and urban areas. In most periods, this is one of the most important inflation figure by the Federal Reserve.
The other important data that will move the US dollar index are the durable goods orders and the house price index. These numbers will be followed by the Thanksgiving holiday that will happen on Thursday.
US dollar index analysis
The daily chart shows that the DXY index has been in a steady uptrend in the past few weeks. It rallied and reached a high of $107.81, the extreme overshoot of the Murrey Math Lines.
The index has also made a break and retest pattern by moving to the $106.60 again. This was a notable level since it was the highest point in April 2024.
It has remained above the 50-day and 200-day moving averages, which made a golden cross pattern a few weeks ago.
Therefore, odds are that the US dollar index will resume its rebound in the coming days. If this happens, the next point to watch will be at $107.81. A move above that level will point to more gains as bulls target the key psychological point at $110.