US Dollar Index Slips as Markets Await Crucial CPI Data

The US dollar index (DXY) saw a textbook 'data shock- rapid correction' pattern this week, driven by stronger-than-expected non-farm payroll numbers. The DXY surged rapidly after the data release but gave back most of its gains ahead of the long weekend, closing at 99.157 and recording a weekly decline of 0.50%. The euro and sterling fluctuated without clear direction this week, while the Australian dollar performed relatively strongly.

The price action in USD/JPY was particularly noteworthy, plunging 2.35% on a weekly basis to close at 156.247, making it the weakest performer among major currencies this week. The price has clearly broken below its 200-day moving average at 158.44, turning the medium-term technical structure bearish.

The market's attention will now shift to next week's CPI figures, which will determine the direction for all three major currency pairs: the US dollar, euro, and yen. Market pricing for a September rate hike remains indecisive, with federal funds rate futures implying a 57% probability.