US Dollar Stays Firm with CPI Report in Focus

The US dollar continues to hold firm.

The DXY is trading in a tight range just below the 100 level after last week’s strong rebound, with today’s May CPI report set to determine whether the recovery can extend further.

Markets expect headline inflation to climb above 4.0% year-over-year for the first time since May 2023, while core CPI is forecast to rise 0.3% month-over-month and 2.9% annually. A result in line with expectations would reinforce expectations of a Federal Reserve rate hike in December, providing continued support for the dollar.

The main downside risk lies in a softer core inflation reading. With shelter accounting for nearly 45% of the core CPI basket and rental inflation showing signs of moderation, a 0.2% monthly increase instead of 0.3% could push DXY back toward the 99.50–99.60 area. However, such a move would likely be viewed as a temporary pullback rather than a broader trend reversal, especially with tomorrow’s PPI release and next week’s FOMC meeting likely to keep demand for the greenback intact.

Outside of inflation data, equity markets remain volatile as investors reposition ahead of Friday’s SpaceX IPO. Meanwhile, Oracle’s earnings report after today’s market close will offer fresh insight into the strength of the AI-driven data centre sector during a sensitive period for technology stocks. Adding to the dollar’s support, investors directed $99 billion into USD money market funds last week—the largest weekly inflow of 2026—highlighting strong institutional demand for safe-haven assets.

Technical Analysis

The DXY has staged a strong rebound from its mid-May low near 97.80, climbing back above the psychologically important 100 level before easing slightly to around 99.85 in early trading. Immediate resistance is located in the 100.40–100.60 zone, which corresponds to the lower boundary of the former April trading range. A decisive break above this area would strengthen the case for a broader bullish reversal.

If CPI data comes in weaker than expected, the index could initially retreat toward the 99.50–99.60 region. A deeper decline would bring the critical support area between 99.00 and 99.20 into focus. While the broader momentum continues to favor further gains, today’s inflation report is likely to determine whether the dollar can extend its recovery or face a temporary setback.