Wall Street Rally to Records as CPI Data Bolsters Fed Cut Expectations; Dollar Weakens

Key Takeaways:

Market Summary: 

U.S. stocks surged sharply higher after the August Consumer Price Index reading reinforced market expectations for a Federal Reserve rate cut at next week’s policy meeting. The CPI increased 2.9% year-over-year, matching consensus forecasts and signaling that inflationary pressures remain contained without accelerating unexpectedly. The report strengthened investor confidence that the Fed will proceed with easing monetary policy, though the modest uptick in prices tempered speculation around a larger, or “jumbo,” cut.

The dollar retreated following the release, paring recent gains as Treasury yields edged lower. Additional support for dovish policy expectations came from labor market data, which showed initial jobless claims rising to 263,000, up from the previous week and further indicating a gradual cooling in the employment landscape.

Equities rallied broadly on the news, with the Dow Jones Industrial Average advancing more than 600 points to close at a record high. The S&P 500 and Nasdaq Composite also posted significant gains as sectors sensitive to interest rates—including technology, real estate, and utilities—outperformed.

With no major U.S. economic releases scheduled for today, markets are likely to consolidate recent moves while focusing on sentiment-driven flows and positioning ahead of next week’s critical FOMC decision. The dollar may remain under mild pressure in the near term as expectations for September easing solidify.

Technical Analysis

Dollar Index (DXY), H4:

The U.S. Dollar Index extended its decline in the latest session, dropping 0.45% as selling pressure drove the gauge back toward recent lows. The index has been locked in a lower-low price pattern since peaking in August, highlighting sustained bearish momentum.

Currently hovering near the key monthly support level at 97.45, the dollar faces a critical test. A failure to hold above this threshold could signal a deeper bearish breakout and reinforce downside sentiment.

Momentum indicators also paint a cautious picture. The RSI remains below the midpoint, reflecting persistent weakness, while the MACD continues to trend beneath the zero line—both consistent with a bearish outlook.

Resistance Levels: 97.80, 98.30

Support Levels: 97.15, 96.65

Dow Jones (DJ30), H4

The Dow Jones Industrial Average overcame strong resistance at its previous all-time peak near the 45,700 level, with yesterday’s rally pushing the index decisively higher. Gaining more than 1% after breaking through the key barrier without significant retracement, the move signals robust bullish momentum and reinforces a bullish bias for the index.

Momentum indicators further support the outlook. The RSI is approaching overbought territory, while the MACD is showing signs of rebounding above the zero line—both consistent with strengthening upside momentum.

Resistance Levels: 46,560.00, 46,940.00

Support Levels: 45,700.00, 45,240.00