The US Dollar Index is holding near 96.92 ahead of Friday’s delayed US Consumer Price Index (CPI) report. A strong January jobs report has pushed expectations for the next Federal Reserve rate cut out to mid-2026. The Fed held rates at 3.50% to 3.75% on 28 January, after three quarter-point cuts in 2025. Two FOMC members voted for another cut, but Chair Powell pointed to stronger growth and a more stable labour market.

Market Focus Before Cpi Release

January Nonfarm Payrolls rose by 130K, the biggest gain in more than a year, and the unemployment rate fell to 4.3%. Treasury yields moved higher, expectations for the next cut shifted from June to July, and the odds of a March cut are now below 5%. Swaps are pricing around 49 basis points of easing through December, down from 59 before the jobs report. Headline CPI is expected at 2.5% year-on-year, down from 2.7%. The release was rescheduled after a brief shutdown. The dollar is also facing pressure from a stronger Japanese yen, linked to official comments and policy plans under Prime Minister Takaichi. On the chart, the index remains below the 200-period EMA at 97.04. It has traded between 96.80 and 96.95, with support at 96.80, then 96.49 and 96.43. Resistance sits at 97.04, then 97.27. As of February 13th, 2026, markets are in a holding pattern, with the US Dollar Index waiting for today’s key CPI data. Last week’s strong jobs report has pushed back expectations for Fed cuts and increased uncertainty. That has kept the dollar locked in a narrow range just below 97.00.

Trading Implications Into The Data

In 2025, the Federal Reserve cut rates three times, then paused in January. The Fed said a better growth outlook supported the pause, but two dissenting votes show policymakers are still divided. Markets are now looking to July as the next possible move, since a stronger economy gives the Fed more time to wait. After much of 2025, when core inflation struggled to stay below 3.0%, markets are looking to today’s CPI for signs of progress. The CME FedWatch Tool shows March cut odds below 5%, a sharp drop from a few weeks ago. Traders are now pricing in just under two quarter-point cuts for the full year. For derivatives traders, this backdrop points to higher short-term volatility around the CPI release. The CBOE Volatility Index (VIX), recently near 16, could jump on any inflation surprise. That can make strategies that benefit from a large move—such as buying straddles or strangles on currency ETFs like UUP—more appealing for the event. Technically, the Dollar Index remains boxed in, with key resistance near 97.04. Options traders may sell call spreads above 97.30 to bet that the ceiling holds, or buy puts below 96.80 to position for a downside break. A clean move beyond these levels after the CPI report would likely force fast position adjustments. A firmer Japanese yen is also weighing on the dollar. This could limit any rally in the Dollar Index even if inflation prints hotter than expected. As a result, upside may be more capped than downside. The first reaction to today’s CPI report will matter, because it will feed directly into rate-cut expectations for July. Treasury yields and interest rate swaps will be key to watch as markets re-price the Fed path. Any meaningful move away from the expected 2.5% inflation reading could set the dollar’s direction for the next several weeks. Create your live VT Markets account and start trading now.

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