US Dollar Index Price Forecast: A break above 100.00 would confirm a double bottom

The US Dollar Index (DXY) appreciates for the second consecutive day on Tuesday, favoured by a mix of concerns about the stalled US-Iran negotiations and hawkish Fed speak, which keeps hopes of a September rate hike alive. The DXY, which measures the value of the US Dollar against a basket of six majors, trades at 99.85 ahead of the US session opening, with the key 100.00 level at a short distance.

Investors' focus this week is on Wednesday's US Consumer Prices Index report, which is expected to shed some more light on the Federal Reserve's rate path, and determine the near-term direction for US Dollar crosses.

Analysts at OCBC argue that the bar for a meaningful shift in Fed expectations remains elevated, noting that "core CPI would need to print at 0.3% MoM or higher in July, above the 0.2% consensus forecast, to materially lift expectations of a September rate hike."

In their view, a "rangebound USD, combined with a constructive risk backdrop, should continue to support carry trades despite ongoing volatility in oil markets. Nevertheless, OCBC experts caution that "Iran's firm conditions for Washington suggest any near-term boost to energy supply is likely to be limited."

Technical Analysis. Key resistance is at the 100.00 area

Dollar Index Spot trades at 99.86, approaching the 100.00 area, which is the neckline of a Double Top pattern just above 99.40. Momentum indicators in the 4-hour chart are shifting into bullish territory, with the Relative Strength Index (14) popping above the 50 level and the Moving Average Convergence Divergence (MACD) inching up above zero, although far from pointing to a decisive trend shift yet.

Bulls need to break above 100.00 to suggest a deeper correction, towards the late July highs at 100.45 or higher. On the downside, immediate support is at the mentioned 99.40 area (August 2 and 7 lows). Further down, the June 4,5 lows, near 99.15, emerge as the next target.