US Dollar Index Price Forecast: Bears push against two-month lows at 99.40

The US Dollar Index (DXY) continued its downward trend on Monday, hitting two-month lows below 99.40 during the European trading session. Recent US economic data has led investors to reconsider their expectations for an immediate interest rate hike by the US Federal Reserve (Fed). On Friday, Retail Sales fell by 0.6% in July, below the market's expectation of a 0.1% increase, while producer and consumer price figures showed easing inflationary pressures.

Nonfarm Payrolls also revealed a surprising decline in US jobs for the month, prompting investors to reduce their odds of a September rate hike to 30% from over 50% a week ago. Strategists at Brown Brothers Harriman noted that the USD's decline was due to the "downward adjustment to Fed funds rate expectations" but added that there was "no fresh catalyst behind today's broad-based USD slump."

The DXY Index is currently trading at 99.40, showing a bearish outlook, with sellers testing the bottom of the last two months' trading range, near the 200-day Simple Moving Average (SMA) of 99.15. Momentum indicators, such as the Relative Strength Index (14) of 35 and the Moving Average Convergence Divergence (MACD) below zero, also point to a lower trend.

If the DXY index manages to close above the 200-day SMA of 99.15, it may signal a stabilization of the index.