During Thursday's Asian trading session, the U.S. Dollar Index (DXY) maintained a firm consolidation, trading around the 98.50 level. Recent U.S. inflation data has consistently exceeded expectations, significantly boosting market expectations that the Federal Reserve will maintain its high-interest-rate policy, thereby driving the dollar index higher consecutively.

Looking at the performance of major currencies this week, the U.S. dollar has generally remained strong, particularly against the Japanese yen. Market data shows that the dollar has gained nearly 0.85% against the yen this week, while the Australian dollar has become one of the few currencies to maintain relative strength against the U.S. dollar.

Market expectations regarding the Federal Reserve's policy path have shifted notably. According to the CME FedWatch tool, the market currently assigns approximately a 66.8% probability that the Fed will maintain the current interest rate level this year, with even a 32.2% probability of another rate hike. The market has largely abandoned previous expectations for a rapid Fed rate cut.

The core reason for this shift in market expectations stems from persistently rising U.S. inflation data. Data from the U.S. Bureau of Labor Statistics shows that the U.S. Consumer Price Index (CPI) rose 3.8% year-on-year in April, up from 3.3% in March. Meanwhile, the U.S. Producer Price Index (PPI) for April increased 6.0% year-on-year, significantly exceeding market expectations of 4.9% and also markedly higher than the previous reading of 4.3%.

On a monthly basis, the U.S. PPI rose 1.4% in April, far surpassing the market forecast of 0.5%. This represents the strongest wholesale inflation data in the U.S. since late 2022. The market believes that escalating tensions in the Middle East, pushing up energy prices, is a key factor contributing to the resurgence of U.S. inflation. As international oil prices remain elevated, U.S. business production costs continue to rise, further heightening concerns about future inflationary pressures.

Typically, persistent high inflation implies that the Federal Reserve needs to maintain higher interest rates to curb demand and price increases. A higher interest rate environment tends to push up U.S. Treasury yields and enhance the attractiveness of dollar-denominated assets, leading to continued significant international capital flows into the U.S. dollar market.

Currently, investors are more focused on U.S. economic data and the Federal Reserve's policy trajectory. The upcoming release of U.S. April retail sales data will also be a crucial driver for the next phase of the dollar index's movement. The market expects U.S. retail sales to grow 0.5% month-on-month in April, down from the previous reading of 1.7%. If the data remains strong, it could further solidify market perceptions of U.S. economic resilience, potentially pushing the dollar index higher.

From a technical perspective on the daily chart, the DXY has broadly re-entered a medium-term uptrend structure. The price continues to trade above both the 20-day and 50-day moving averages, indicating the dominance of the bullish trend. The area around 98.50 has now become a key short-term support zone, while the 99.00 to 99.30 region represents a significant resistance band. The daily MACD indicator is diverging upwards again, suggesting a recovery in the dollar's medium-term upward momentum. The RSI indicator remains above 60, showing overall market strength without yet entering extreme overbought territory.

Observing the 4-hour chart, the dollar index has recently entered a consolidation phase at elevated levels. Short-term moving averages maintain a bullish alignment, indicating continued short-term strength. Although the MACD indicator shows some flattening at high levels, no clear bearish crossover signal has emerged. The RSI indicator hovers around the 55 to 60 range, suggesting buyers still hold the advantage. If the dollar index subsequently breaks above 99.00 effectively, it could further test the 99.50 area; a break below 98.20 might lead to a short-term pullback towards 97.80.

Overall, the U.S. dollar index remains supported by high U.S. inflation and expectations for sustained high interest rates. The direction of the dollar's next phase will be determined by U.S. retail sales data and shifts in global risk sentiment.

The primary drivers for the current U.S. dollar index remain the resurgence of U.S. inflation and market expectations that the Federal Reserve will maintain high interest rates for an extended period. With CPI and PPI data consistently exceeding expectations, the market has significantly reduced bets on rate cuts this year and has even begun discussing the possibility of another rate hike. From a technical structure perspective, the dollar index maintains a generally strong trend, but it is approaching a significant resistance zone in the short term. Future market focus will center on U.S. retail sales data, changes in U.S. Treasury yields, and the outcomes of U.S.-Asia major power talks. If the U.S. economy continues to demonstrate resilience, the dollar index may have further room to rise.