Takeaway

The presenter argues the US Dollar Index (DXY) is at a critical inflection point, having tested key lateral support at 98.68-98.69 for four straight weeks. He believes tomorrow's CPI data and next week's FOMC decision will be the catalysts that resolve this range, with a confirmed break lower targeting 97.65 and a rally above 99.50 signaling a potential bullish reversal.

What the presenter said

• The DXY has spent four consecutive weeks consolidating just above a key lateral support zone. [00:14]
• This support is defined at 98.68-98.69, which corresponds to the 50% retracement of the entire yearly range and the August high week close. [00:18]
• A break and close below this 98.68-98.69 zone would threaten the yearly uptrend and open a path towards the 61.8% retracement at 97.65. [00:50]
• Key resistance on the 4-hour chart is 99.41-99.49. The presenter argues a breach above 99.50 would suggest a more significant near-term low is in place and shift the focus higher. [02:08, 02:24]
• The market's direction hinges on upcoming event risk: CPI data tomorrow and the FOMC rate decision next week. [00:30]
• A hotter-than-expected inflation number would fuel expectations for a Fed hike, which markets are currently pricing with a 64% probability. [03:46, 03:57]

Trade ideas

• None stated. The presenter framed the market as being in a holding pattern ahead of key data, outlining the breakout levels rather than putting forward an actionable trade. The view is that the DXY remains in a multi-week downslope while testing key support.

Levels and data cited

• DXY Key Support: 98.68-98.69
• DXY Downside Targets: 98.24 (Yearly open), 97.94 (61.8% retracement), 97.65 (Alternate 61.8% retracement)
• DXY Initial Resistance: 99.13 (200-day moving average)
• DXY Key Resistance: 99.41-99.49
• DXY Bullish Pivot: 99.50
• Data Cited: Markets are pricing a 64% probability of a Fed rate hike next week (CME FedWatch Tool).
• Data Cited: August Core CPI is expected at 2.4% (from 2.5%); Headline CPI is expected at 3.4% year-on-year.

Risks and what would invalidate this

• The primary risk identified is a break and confirmed close below the 98.68-98.69 support zone, which would signal a resumption of the downtrend.
• The bearish bias would be invalidated if rallies extend beyond the 99.50 resistance level.
• A weaker-than-expected inflation print could temper Fed hike expectations and weigh on the dollar.