US Inflation Declines for Two Consecutive Months: Is a September Fed Rate Hike on the Table?

Although a decline in inflation is generally perceived positively, the possibility of a Fed rate hike in September could dampen risk appetite in the market. The index's RSI is near overbought territory at 67, suggesting a possible short-term correction. The MACD is positive but momentum is weakening, raising doubts about the sustainability of the uptrend. Despite the price being above the SMA20 and SMA50, the news flow and technical indicators point to a potential downward movement in the short term. Therefore, a cautious stance should be maintained.

Cooling inflation is strengthening expectations that the Fed may adopt a more dovish stance on interest rate hikes. This could create a favorable environment for the NDX index, which is heavily weighted toward technology stocks. Technical indicators also point to a strong uptrend; although the RSI above 70 signals overbought conditions, the MACD being positive and above its signal line indicates continued momentum. In the short term, the index is expected to sustain its upward movement, but there is a risk of some consolidation or pullback due to overbought conditions. The news flow and potential Fed statements will be decisive for direction.

The decline in inflation could reduce the likelihood of a Fed rate hike and weaken the dollar. Technically, DXY is trading below its 20-day moving average, with RSI at 45 indicating weak momentum. MACD is in negative territory and below the signal line, supporting a short-term bearish trend. However, as the price remains above the 50-day average, the downside is expected to be limited. Therefore, I anticipate a slight downward movement in the short term.