USD Support Test ContinuesU.S. Dollar Currency IndexTVC:DXYFOREXcomThe US Dollar has had the kitchen sink thrown at it so far in August. It was just a month ago after the DXY breakout following the CPI report that President Trump threatened to fire Jerome Powell. This brought a sell-off in the Dollar but, importantly, buyers showed up to hold a higher-low in the currency, above the low from the first day of Q3 trade. The currency then went on to rally into the end of the month and July ended up as the strongest monthly outing for the USD since April of 2022, right around when the Fed was gearing up rate hikes in response to the inflation they had refused to address in 2021. But so far in August, a different tone has shown as a massive revision to the headline NFP number for the prior two months drove concerns about weakness in the labor market. Yesterday's CPI report showed Core CPI jumping back above 3% with a 3.1% annualized print. This is well above the Fed's 2% target and also considering that the unemployment rate remained at the 4.2% expectation, there's the very real question, as illustrated by Powell at the last FOMC meeting, as to whether policy is too restrictive. Nonetheless markets now have a widespread expectation for a rate cut in September followed by the possibility of two more into the end of the year. But, there's the question as to how long term rates will respond, as we saw last year when Treasury yields shot higher even as the Fed cut rates. That has pertinence with the USD because it was when 10-year yields topped on January 13th of this year that DXY did, too. Perhaps more interesting at the moment is just how aggressive rate cut expectations are and the fact that the USD, so far, hasn't been able to stage a deeper breakdown. Perhaps one reason for this draws back to counterparts. Because currencies are the base of the financial system the only way to value a currency - is with another currency. So, for the US Dollar especially, represented by a 'basket' of underlying currencies in DXY, to get further weakness we have to see some of those other currencies take on strength. And for the Euro which represents 57.6% of the DXY basket, EUR/USD has already been in a massive bullish trend for much of the year. The Japanese Yen is 13.6%, and as I looked at in the USD/JPY post, the pair remains supported above a structure of recent higher-lows. For the USD, we have a couple of trendlines in-play at the moment. The long-term trendline connecting 2001 and 2020 swing highs, and also the shorter-term trendline taken from the July lows. If looking for USD-weakness, I still remain partial towards GBP/USD and that bullish trend has really come back to life over the past couple of weeks. For USD-strength, I still lean towards EUR/USD and perhaps even USD/JPY, provided that fibonacci support structure remains respected. - js