Dollar & Dow on a Knife Edge Ahead of Long-Delayed Core PCE

Key Takeaways:

*DXY softened over the past 20 hours but has edged higher in the last 12–13 hours as traders hedge ahead of today’s long-delayed Core PCE inflation data..

*DJI edged up modestly yesterday, supported by steady Treasury yields, improving risk appetite, and rising energy prices from Ukrainian strikes on Russian refineries. 

*Shared catalyst: Both the dollar and Dow are tethered to the Core PCE print—a softer reading could weaken the dollar and boost equities, while a hotter reading could extend dollar gains and trigger defensive rotations in the market.

Market Summary:

The U.S. Dollar Index spent most of the past 20 hours under pressure but has edged higher in the last 12–13 hours as traders reposition ahead of today’s long-delayed Core PCE Price Index, the Fed’s preferred inflation gauge. Early weakness reflected softer U.S. data subdued ISM services prices, cooling private employment, and sluggish consumer momentum which reinforced expectations of a potential Fed rate cut next week and pushed yields lower.

Sentiment shifted overnight as investors trimmed short-dollar exposure and added defensive hedges ahead of the PCE release. Stabilising global risk appetite, firmer oil prices, and a modest rebound in Wall Street equities tempered prior dollar selling, though broader fiscal and real-yield concerns continue to weigh.

The Dow Jones edged up yesterday, supported by steady Treasury yields, improved risk tone, and rising energy shares after Ukrainian strikes on Russian refineries reignited supply concerns. Gains were broad but modest, reflecting caution ahead of the PCE print as the last major input before next week’s Fed decision. A cooler reading could reignite dollar weakness and lift the Dow, particularly rate-sensitive sectors, while a hotter print could extend the dollar’s rebound and trigger defensive rotation in equities.

Global sentiment offered some stability, with Asian markets recovering after a strong JGB auction, European equities buoyed by resilient earnings, and easing geopolitical tensions. Still, macro uncertainties remain, leaving both the dollar and Dow poised for outsized moves once the Core PCE data hits.

Technical Analysis 

DXY, H4: 

The DXY on the chart continues to trade under a clear bearish structure after breaking below the ascending trendline that supported price throughout November. The breakdown triggered a shift in momentum, and the index has since been making lower highs and lower lows, signaling sustained downside pressure. Price is currently hovering just below the 99.00 resistance zone, which has now turned into a ceiling after the recent breakdown. Unless DXY can reclaim this level and close firmly above 99.60, the broader bias remains bearish. 

RSI is recovering from oversold territory but still sits below the midline, indicating only a mild corrective bounce rather than a strong bullish reversal. Meanwhile, the MACD remains in negative territory, with the signal lines attempting to curl higher but still lacking a confirmed bullish crossover, suggesting momentum remains weak. If bearish pressure resumes, key support levels lie at 98.50. Overall, the trend favors sellers unless the index can reclaim the broken trendline and establish a higher high above 99.60.

Resistance Levels: 99.00, 99.60
Support Levels: 98.50, 98.00

Dow Jones, H4: 

The Dow Jones continues to edge higher on the chart, maintaining its constructive uptrend as price holds firmly above the rising trendline drawn from the October lows. Recent sessions show the index grinding toward the key $48,000 resistance level, an area that previously capped upside attempts and now serves as the immediate barrier for bullish continuation. Price action has stabilized well above the 78.6% Fibonacci retracement near $46,420, reinforcing this zone as the primary floor for the current bullish structure. 

Momentum indicators are aligned with the bullish bias. The RSI has climbed to around 62, showing strengthening momentum without entering overbought territory as an encouraging sign for buyers looking for continuation. Meanwhile, the MACD maintains a positive crossover with widening histogram bars, signaling improving upside momentum after the late-November pullback. These developments collectively suggest that buyers remain in control and dips may continue to attract demand as long as the index respects the rising trendline.

Resistance Levels: 48,000.00, 49,100.00
Support Levels: 46,420.00, 44,325.00