The US Dollar rallies back after CPI, is the correction is over ? – EUR/USD, GBP/USD & Dollar Index (DXY) overview

The US Dollar saw a sharp correction after the fragile ceasefire began, but that downward trend has now completely stopped.

With the peace narrative having stalled, it is clear that the FX market is taking a more realistic view of the US-Iran diplomatic talks than Stock Markets, which remain optimistic despite little real progress.

Foreign exchange markets are focusing on energy prices instead of tech sector excitement, and are adjusting for geopolitical risks.

After gaining against the US Dollar in late March and early April, most major currencies are back to trading in a narrow range.

Today, though, they are quickly reversing as WTI Crude oil moves back above $100 with the recently souring narrative..

The ongoing conflict and related economic challenges are supporting the US Dollar. Although new reports suggest Iran may dilute its highly enriched uranium to 3.7% and 20%, overall diplomatic talks have stalled, and the uncertainty continues to disrupt energy supply chains while adding to the demand for the US Dollar.

Along with the ongoing geopolitical uncertainty, a higher-than-expected inflation report has strengthened the US Dollar, and make sure to stay logged in because there will be more reports for inflation coming up tomorrow (PPI).

Today’s CPI showed headline inflation at 3.8% (compared to 3.7% expected) and core CPI at 2.8% (versus 2.6% forecast) – A huge rise but not so surprising considering the explosion in gas prices.

The strong inflation reading keeps suggesting that the Fed will keep rates as is (if not hiking!), putting pressure on other major currencies.

We will look at the Dollar Index, EUR/USD, and GBP/USD to assess the current state of the FX Market and where to look next.

Discover:

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• Asia open: Stocks hit new highs on AI optimism as US-Iran ceasefire hangs by a thread
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The US Dollar is breaking out of its end-March downward channel after forming a triple bottom right around the 97.50 level.

With the recent lows conciding with the mid-zone of the larger 96.00 to 100.00 range, the consolidation could be tightening further between 98.00 to 100.00 as long as the peace process doesn't move forward.

Expect more US Dollar rallies if the Index breaches 08.50

Levels of interest for the Dollar Index:

Resistance Levels

• 98.50 to 98.70 War Pivot
• 98.78 4h 200-period MA
• 99.40 to 99.50 Resistance
• Initial War Spike 99.68
• 100.00 to 100.50 Main Resistance Zone
• War Highs 100.544

Support Levels

• 98.00 2025 Support (testing – bearish below)
• Support 97.40 to 97.60 (triple bottom)
• 2025 Lows 96.40 to 96.80 Support
• Range lows at Early 2022 Consolidation just below 96.00

GBP/USD is still remaining between 1.3410 to 1.36 but now rejecting its resistance zone, heading back to support.

Add to the ongoing outflows political turmoil in the UK with Keir Starmer's Ministers resigning and you get there a pretty bearish outlook for the Pound.

While still far, look at whether the 1.34170 (2024 top) level holds.

Levels of interest for AUD/USD:

Resistance Levels

• December Resistance 1.36 (range highs)
• pre-FOMC Highs 1.36010
• Resistance 1.37 zone
• 2025 Resistance around 1.38

Support Levels

• Key Pivot 1.3410 to 1.3440
• 1.34170 (2024 top) level
• Pivotal Support 1.3250 - 1.33
• 1.32 War Support

EUR/USD is also rejecting its 1.18 resistance and quickly falling towards the 1.17 momentum pivot, with bearish acceleration expected as the RSI is falling below neutral.

Sellers are also breaching the 4H 50-period MA, hence this could weigh on the price action. While still lacking momentum, traders will want to confirm the action with strong bear candles and volumes within 1.1720.

Levels to place on your EUR/USD charts:

Resistance Levels

• 1.17380 4H 50-period MA
• Resistance Zone around 1.18 (+/- 150 pips)
• 1.1830 June 2025 highs
• 1.1850 to 1.1860 Recent Test
• Sep 2021 Highs – Resistance 1.19 to 1.1950 Zone

Support Levels

• 1.17 to 1.1720 March Pivot
• Rebound highs 1.17200 (bearish below)
• Major Pivot 1.16250 to 1.16350
• 1.1540 to 1.1570 War Support
• 1.1475 to 1.15 November Support
• War lows 1.1410

Safe Trades and keep a close eye on Ceasefire news!

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