The USD Index Price Prediction: An additional range is expected. data on inflation to determine bond yields and the Fed’s course. for the second week in a row.  An additional range is expected. data on inflation to determine bond yields and the Fed’s course.

The US Dollar Index is rising as a result of higher Treasury rates. In the coming week. The January inflation statistics will become the focus of attention.

USD had a strong show

The DXY index, which tracks the performance of the U.S. dollar, had another strong week. Rising approximately 0.65 percent to 103.63 over the past 5 trading days. A change that enabled the dollar index to fully erase the losses suffered in Jan.

The significant increase in Treasury rates throughout the curve was the main factor driving the weekly increase. This was brought on by the notion that the Fed would be required to keep raising interest rates. To defeat inflation.

The position will likely remain restrictive for a longer period than initially envisaged. U.S. bond yields hit a four-week top as investors increased their expectations for the direction of fiscal policy.

USD Implied Rate for 2023 and Fed Futures vs.  US Treasury Yields

The terminal rate is currently seen at 5.17 percent vs 4.92 percent earlier this month. As evidenced by the 2023 Fed futures contracts included in the graph. This is due to markets repricing up the monetary policy trajectory, as is seen in the chart under.

Source: TradingView

It can withstand additional tightening. To put things in perspective, the January jobs data showed that U.S. firms created 517,000 new positions, which was about twice as many as expected.

Robust employment during a period of multi-decade, massive unemployment can maintain wage constraints and household spending. tilted upward, supporting CPI trends. also delaying its divergence towards the objective of 2.0%.

Strong labor market indicators have altered Wall Street’s calculations, causing markets to reevaluate prospects for FOMC raises given how resilient the American economy continues to be in the near term.

Shortly, additional sidelined trading is probable.

When the United States Bureau of Labor Statistics issues its data on inflation for a prior month on Tuesday. We’ll have a better idea of how consumer prices have been changing recently.

On a seasonally adjusted basis, it is anticipated both the headline and core CPI will have increased by 0.4%. That would translate into a two-times reduction in the annual rates to 6.3 percent and 5.5 percent, correspondingly.

The jump in gasoline prices, rose 4.4percent at the start of the year. According to the American Automobile Association, may, however, fall short of predictions, particularly for the overall barometer.

The CPI Factor

A negative CPI surprise might reinforce the “upward for more” narrative put forward by some Fed policymakers by prompting markets to reprice the trend for the terminal rate higher.

In the event that this scenario plays out, yields, particularly ones at the front of the curve. It might increase higher. This will opens the door for the U.S. dollar to continue its comeback in the upcoming weeks. In doing so of this, the DXY index may be skewed upward in the near future.

US Dollar Technical Perspective

The U.S. dollar index appears to be reaching a significant technical resistance area near 103.80/104.00. after a recent comeback. If this area is decisively broken during the upcoming trading sessions,

Bulls might try 104.65 first, then 105.60. On the other hand, initial support. which is a base produced by a long-term ascending trend line. which can be seen around the $103.00 mark if prices remain at current levels. The 2023 declines are highlighted just below the zone.

Key Technical to Watch