Dollar Index steadies around 92.50 as market braces for US CPI release

The Dollar Index [DXY] steadied in Asia around 92.50 as investors await US CPI release, which is likely to have picked up pace in August on the back of higher gasoline price. 

Core inflation, which strips out energy and food prices, is expected to have risen 1.6% on an annual basis in August, which would be the lowest since early 2015, versus 1.7% in July. 

The American dollar would extend the rally if the core number betters estimate. An upbeat headline figure may not necessarily be a good news unless factors other than gasoline prices are responsible for the rise.  

A strong core CPI could boost the odds that Fed would maintain the gradual pace of policy tightening. The resulting Treasury yield curve steepening could boost the US dollar.  On the other hand, a weaker-than-expected core CPI could end up killing the dollar recovery. 

Dollar Index Technical Levels

Despite the recovery from the low of 91.01 [Sep 8 low], it is too early to say that a bottom is in place, given the falling channel is intact. Only an end of the day close above 92.63 [channel resistance] would signal bearish-to-bullish trend reversal and shall open up upside towards 93.35 [Aug 31 high] and 93.46 [50-DMA]. 

On the downside, breach of support at 92.35 [Asian session low] could yield a pull back to 91.71 [previous day's low], under which the Sep 8 low of 91.01 could be revisited.