US Dollar Index Price Forecast: Calm Conditions Precede the Next Bullish Move

• Ahead of October’s US CPI release, the US Dollar edges lower.
• Fresh military strikes on Iran are highly unlikely, US President Trump indicates.
• The retreat in oil prices continues to weigh on the US Dollar.

Falling oil prices, driven by hopes of a United States (US)-Iran agreement, are weighing broadly on the US Dollar (USD) against its peers.

With WTI Oil touching a fresh 10-week low near $84.20, the US Dollar Index (DXY) remains near 101.67 during Tuesday’s European session, retaining the previous day’s losses. The index tracks the Greenback against six major currencies.

A softer tone from Washington over the weekend has lifted investor optimism, MUFG analysts wrote in a note. President Donald Trump told CNN that ordering further military strikes on Iran would be “highly unlikely” if negotiations continued to make progress.

MUFG nevertheless warned that US President Trump had made the outcome conditional on the quality of any agreement, saying “it depends on whether or not they sign a very strong agreement,”. The bank regards that qualification as critical to maintaining the recent decline in geopolitical risk premia.

As oil prices fall, currencies of net energy-exporting economies, including the US, lose some of their appeal.

October’s US Consumer Price Index (CPI) figures, due at 13:30 GMT, are the main domestic focus for investors.

Fed watches inflation spillovers as core CPI surprises moderate

This week’s US inflation release will be scrutinised by both investors and the Fed “closely for evidence of spillover effects from higher energy prices.”, according to MUFG/BTMU analysts. As they observe, “recent core CPI readings have surprised to the upside over the last couple of months,” with the resulting effect described as “putting pressure on the Fed to tighten policy.” The analysts nevertheless see signs that the near-term risk may be easing: “consensus expectations are looking for a softer core CPI print of 0.2%M/M in October,”. This leaves some room for inflation momentum to slow, even as policymakers continue to monitor the pass-through from energy costs.

US Dollar Index Holds a Neutral Technical Bias

At 101.65 on the daily chart, Dollar Index Spot remains close to its 20-period exponential moving average (EMA) of 101.79, leaving the technical bias neutral.

A Relative Strength Index (RSI) reading near 49 also signals neutral momentum, offering little counterweight to the prevailing structural pressure.

A Bullish Flag formation suggests the neutral phase may be a pause before another upward move, consistent with the pattern’s historical behaviour.

The 20-EMA around 101.79 provides the first resistance level, ahead of the reclaimed trend-line area near 102.20. Sellers may seek to defend the broader corrective structure there. Should the index break above that structure, a return to its yearly high near 103.00 would become more likely.

(The technical analysis of this story was written with the help of an AI tool. Know more.)