US dollar bulls have seemingly halted their ascension as they wait for the US inflation data that is due this Tuesday.
The market is predicting that August's headline CPI may edge lower by 0.1%, further strengthening the case that US inflation has peaked.
Even so, it is said that the US dollar has priced in an 85% chance of a 75-basis-points rate hike from the US Federal Reserve next week, Wednesday. Fed chair Jerome Powell has reiterated several times over the past few weeks that the central bank is not yet looking to taper off the pace of their rate hikes.
Looking at the current price action ahead of the CPI, the DXY has pulled back after the RSI reached above the 70 level, highlighted in the circle, signaling that the price is overbought. The dollar index fell to a one-week low of 108.900, just below an area that has recently acted as a pivoting point.
The wick from last week’s last candle suggests that a demand zone might be causing a firm rejection below 108.900, at least until the CPI data remains unknown for the next 48 hours.
It may be too soon to say that the upwards momentum has been disassembled. As such, the expectation of a bullish push is still in play, and the price may still reach targets suggested by the Auto Fib Retracement Indicator. Targets in play include last week's peak at 110.700, and 111.950 a little further afield.
The DXY price closing within the plausible demand zone at 108.000 - 109.000 will open the DXY to bearish price targets indicated on the chart, including 107.300, 106.750, and 106.200.