Dollar Index (DXY) faces a key test from upcoming PPI and CPI – potential reactions

[Ben Graham]

Some contradicting headlines are influencing the US Dollar in a battle of wits right ahead of quintessential inflation data.

Markets have been unable to provide a clear answer on how the upcoming FOMC (September 17th) and its rate cut expectations will affect the future outlook for the Dollar.

The thesis had been that despite negative news (Jerome Powell's change in tone at Jackson Hole or the recent Non-Farm Payrolls), traders have failed to sell the US Dollar convincingly, with the DXY doomed in sideways action.

The freshly released downward revisioned BLS report (bearish for the USD) and the rising tensions in the Middle East with Israel-Hamas war taking another turn (bullish for the USD) are once again prevented a clear path ahead for the Greenback.

However, some interesting technical patterns might be getting into play as we approach the surely decisive pair of inflation reports in the US PPI (8:30 E.T. tomorrow) and Thursday's CPI report.

Let's take a look at the Dollar Index.

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How could the data influence the US Dollar? Potential reactions

The upcoming PPI report should bring back memories of the previous humoungous beat in the past month (0.9% vs 0.2% exp) pushing inflation expectations higher for the consecutive University of Michigan surveys (the FED hates that).

This comes as Participants started to be less and less cocnerned by tariffs and their impact.

Despite hurting producers before consumers, fears are that Producer Prices increases will repercutate in upcoming CPI releases, highlighting Thursday's number even more.

A relatively weak PPI could help to support current sentiment quite largely, indicating that the past month increase was just a one off – This should support a 50 bps cut further (Dollar down).

However an upward beat should do just the reverse and add to the anxiety (Dollar up)

CPI will really be in focus however as Participants look to see if the higher producing costs have started to bite in consumers pockets.

Reactions should be similar to the PPI, but their extent could be much larger: A higher inflation for Consumers should prevent a 50 bps entirely, towards more gradual cut and spark stagflation fears.

US Dollar could hence maintain its sideways movement.

Dollar Index intraday outlook

Dollar Index 4H Chart

US Dollar Index (DXY) 4H Chart, September 9, 2025 – Source: TradingView

Last week's data has brought some renewed selling momentum as bears have managed to form a downward tight bear channel (bear candles overlapping each other).

The weekly open hence formed a small gap to test the July support/pivot zone, and this morning of action actually saw a decent rebound, undoing some of the bear advantage.

Arriving at a key technical standpoint, bears entering here could take the hand by rejecting the 97.60 to 97.80 range lows (break-retest style).

Keep in mind that action will be swift tomorrow (expect spikes) and prices may just dawdle around until then.

Key levels of interest for the Dollar Index:

Support Levels:

• 97.40 to 97.80 Range Support (currently getting tested)
• Last Pivot before run-higher 97.15 Zone acting as Key Support
• 2025 Lows Major support 96.50 to 97.00

Resistance Levels:

• 98.00 Mid-Range pivot
• 98.50 to 98.80 Resistance Zone
• Mid-line of the ascending channel and psychological level 99.50
• 100.00 Main resistance zone

Dollar Index 30m Chart

Dollar Index (DXY) 30M Chart, September 9, 2025 – Source: TradingView

Looking closer to the short-timeframe, the support zone that is currently trading will be a major test for bulls.

Managing to hold the lows of the current support (97.40, immediate short-term support) would indicate balanced action, which would be more in the bulls favor after failing to hold lower.

On the other hand, sellers appearing at the immediate short-term resistance (97.70) could trigger break-retest selling reactions.

A breakout in any direction should see continuation.

Safe Trades!

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