US Dollar Index rebounds on elevated US CPI and renewed geopolitical jitters

• The DXY has settled above 98.50 in the absence of progress in the Russia-Ukraine peace talks.
• The risk-on impulse has improved the appeal for safe-haven assets.
• Bulls are firmer above the 200-EMA and have extended gains above the 20-EMA.

The US dollar index (DXY) has rebounded sharply from 97.72 on Thursday and is settling above 98.50 as inflation levels in the US hit skyscraper. The US Bureau of Labor Statistics reported the US Consumer Price Index (CPI), which was in line with the estimate of 7.9% but well above the prior record of 7.5%. This has raised the odds of an aggressive tightening monetary policy by the Federal Reserve (Fed) significantly.

Higher inflation levels may force the Fed to confirm a 50-basis point interest rate hike

It is worth noting, that the print of 7.9% for US CPI belongs to February and is not multiplied by the elevated oil prices. The oil prices have retreated from multi-year highs principally but are still higher by almost 10% in March. Black gold is the backbone for every moment in men, materials, and machines. Therefore, the multiplier impact of the black gold will force the Fed to resort to a 50- basis point (bps) hike in the interest rate.

The major event on Friday: Michigan Consumer Sentiment Index by the University of Michigan.

Major events next week: Producer Price Index, New York Empire State Manufacturing Survey, Retail Sales, Interest Rate Decision (most important), Initial Jobless Claims, Industrial Production, and Existing Home Sales.

Eminent issues on the back boiler: Russia-Ukraine war, and Eurogroup meeting.

US Dollar Index Technical Analysis

On an hourly scale, the DXY has attracted some significant bids near February 24 high at 97.74. The 200-period Exponential Moving has acted as major support for the greenback-based index. The DXY has extended its gains after violating the 20-EMA. The Relative Strength Index (RSI) (14) is hovering around 60.00 and is likely to establish a bullish rally after the violation of the same.

US Dollar Index hourly chart