The US Dollar Index (DXY), which measures the dollar against a basket of other currencies, remains under pressure, trading below the round 99.00 level. However, it is holding above the three-month low seen in August as markets await this week's US inflation releases.

US Producer Price Index (PPI) and Consumer Price Index (CPI) readings are scheduled for Thursday and Friday, respectively. These key data points could provide fresh signals about the Federal Reserve's monetary policy path and, in turn, have a material impact on the dollar's short-term trajectory. Meanwhile, a stronger Japanese yen is expected to add momentum to DXY's recent decline after the index earlier reached an almost three-week high.

Last Friday's US nonfarm payrolls (NFP) report, which beat expectations, increased the odds of a Fed rate hike at the September 15–16 meeting amid inflation risks tied to elevated energy prices. Oil is trading near the highs seen on July 24 as worries grow about potentially prolonged supply disruptions stemming from US–Iran clashes in the Strait of Hormuz.

That dynamic creates a geopolitical risk premium and supports the US dollar's safe-haven appeal.

OCBC analysts described the latest US jobs report as "mildly dollar-supportive but insufficient to sustain a long-term rally." They note that strong employment data "support the resilience of the US economy and can raise the likelihood of Fed tightening, which in turn would prevent further dollar weakness." However, given "ongoing wage pressures," OCBC expects markets will need more convincing inflation data to be confident about a September rate hike.

Therefore, traders should focus on the inflation report this week for the best trading opportunities: a positive surprise could catalyze a renewed dollar advance, while weaker-than-expected inflation would likely produce two-way price action.

From a technical perspective, DXY retains a short-term bearish bias, trading below the 200-day exponential moving average (EMA) at 99.52 and beneath the 20-day SMA. The 20-day SMA is capping attempts to approach the important resistance presented by the 200-day EMA.