DXY Analysis: Dollar Targets 108.00 as Bitcoin Plunges and Gold Sees Weekly Decline on Inflation Data

US Dollar Holds Near Two-Week Highs on Sticky Inflation and Fed Rate Cut Bets

The US Dollar Index (DXY) hovered near two-week highs on Friday following US inflation data that aligned with expectations, reinforcing market bets on potential Federal Reserve rate cuts later this year. The dollar index traded close to the 107.45 peak reached earlier in the session, last seen at 107.31, as traders assessed economic indicators and geopolitical risks.

Daily technical analysis shows a market that is trying to build a new, higher support base. The chart indicates it has a clean shot at the 50-day moving average at 108.000. This indicator controls the intermediate trend, which is down.

Longer-term traders are focusing on the 200-day moving average at 104.990. This means they expect more weakness, which means they’ll be looking to sell the current rally.

Traders should also look for increased volatility since we’re in a news driven market.

At 15:11 GMT, the U.S. Dollar Index is trading 108.182, up 0.239 or +0.22%.

Inflation Data in Focus

The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) price index rose 0.3% in January and increased by 2.5% year-over-year, down from December’s 2.6%. The core PCE, which excludes food and energy and is closely watched by the Fed, also rose 0.3% month-over-month and eased to 2.6% annually, down from an upwardly revised 2.9%. These readings met economists’ expectations and suggested that while inflation is easing, it remains sticky above the Fed’s 2% target.

Market participants continued to price in 61 basis points of rate cuts this year, with the first cut not fully expected until July, according to LSEG data. Peter Cardillo, chief market economist at Spartan Capital Securities, noted that while inflation showed signs of cooling, the Fed could face a dilemma as broader economic indicators point to a slowing economy.

Tariff Threats Weigh on Sentiment

Investor sentiment was also pressured by renewed tariff threats from US President Donald Trump. Trump announced that 25% tariffs on imports from Canada and Mexico would take effect on March 4, earlier than previously indicated. Additional 10% duties on Chinese goods and proposed 25% tariffs on European Union imports added to market jitters, reviving fears of an escalating global trade war.

Treasury Yields Slip After Inflation Data

US Treasury yields dipped as investors digested the inflation figures. The benchmark 10-year yield fell by nearly 5 basis points to 4.2387%, while the 2-year yield eased to 4.034%. Lower yields typically reduce the dollar’s appeal but broader risk-off sentiment and trade concerns helped support the greenback.

Bitcoin Extends Losses, Gold Drops

Bitcoin dropped below $80,000 for the first time in over three months, hitting a low of $78,226.23 before recovering slightly to $81,539.64. The digital asset has lost over 14% this week, marking its worst week since the 2022 FTX collapse. Meanwhile, gold fell 0.6% to $2,859 per ounce, pressured by a stronger dollar and weakening risk sentiment. Spot gold was down 1% at $2,845.57, on track for its first weekly decline in nine weeks.

Market Outlook: Dollar’s Path Tied to Fed and Trade Developments

The US dollar could maintain its strength if economic data continues to show persistent inflation and macroeconomic softness, bolstering safe-haven demand. However, escalating trade tensions could limit gains, particularly if tariffs weigh on growth prospects. Traders will be closely watching the Federal Reserve’s March 18-19 meeting for signals on rate policy, with inflation trends and geopolitical developments likely to drive market action in the near term.

More Information in our Economic Calendar.