US Dollar Index DXY steady around 95.50 ahead of US CPI.

• The DXY index is trading in a limited range around 95.50.
• Investors’ attention remains on the US CPI data.
• Weekly initial jobless claims data will also be released today.

The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, moves within a narrow range around the region of 95.50 at the start of the European session on Thursday.

DXY index focuses on the CPI

The DXY index alternates gains with losses within a narrow range in a context of caution ahead of release of US inflation figures of January measured by the CPI.

The watchful stance among market participants can also be seen in the US cash markets, where yields are moving slightly defensively so far.

On inflation, the market consensus expects consumer prices to have risen 7.3% annually in Januaryalthough an upside surprise has the potential to spark a recovery in the dollar along with yields, as this scenario should support a possible 50bp interest rate hike by the Fed in March.

Currently, and according to the CME Group’s FedWatch tool, the probability of a 25 basis point rate hike in March is just under 80%. The odds of a 50 basis point hike are above 20%.

Aside from inflation figures, the US calendar will also see the release of weekly jobless claims.

Relevant DXY US Dollar Index Levels

At time of writing, the DXY index is down 0.06% on the day, trading at 95.50. A break above 96.01 (55-day SMA) would open the door to 97.44 (28 Jan high) and 97.80 (30 Jun 2020 high). On the other hand, next support appears at 95.20 (200 SMA). weeks), followed by 95.13 (Feb 4 low) and 94.62 (Jan 14 low).