Crypto: US Dollar Hits 18-Month High Ahead of Key CPI Report

The US dollar is returning to levels it hasn’t seen in 18 months. The DXY hovers around 102.2 after starting from about 98.8 in early September. For crypto, the timing is bad: the United States will release their September CPI on October 14, just two weeks before the Fed’s next decision. Bitcoin had resisted the dollar’s rise in September. It must now do so again.

The dollar reaches an 18-month high

The rise has been rapid. The Dollar Index was around 98.8 at the beginning of September. It now exceeds 102 and has surpassed its July highs around 101.6. The move had already started to surprise in late September. Crypto was then rising alongside the dollar, a fairly unusual setup after several periods when the two assets moved in opposite directions.

The DXY gained nearly 2% in September alone. Several factors support the greenback. US bond yields remain high, Europe is undergoing new budgetary and political tensions, and conflicts in the Middle East are also pushing some investors toward safe-haven assets.

The market is now around a technical zone monitored for several years. Analysts do not agree on what comes next. Some see the current rise as a simple return to an old trendline before a possible rejection. Others still view the dollar as part of a much longer bullish cycle. The CPI can help decide between some of these scenarios.

For Bitcoin and the crypto market, a sustainably strong dollar could increase selling pressure, while a pullback fueled by expectations of Fed rate cuts would favor a return of risk appetite.

The CPI arrives just before the Fed’s next decision

On Wednesday, October 14, investors will have their eyes on the United States. The Bureau of Labor Statistics will publish the September Consumer Price Index (CPI), a key indicator for upcoming Federal Reserve decisions. This will be followed by producer price index (PPI) and retail sales figures, before the Fed meeting scheduled for October 28.

In September, the US central bank raised its rates by 25 basis points, bringing their target range between 3.75% and 4%. It was the first hike since July 2023. Since then, expectations have shifted. According to CME FedWatch, markets estimated an 82.8% probability that rates would remain steady in October, compared to only 51% a month earlier.

But these forecasts remain fragile. Inflation higher than expected could revive fears of further monetary tightening and support the dollar. For Bitcoin and the rest of the crypto market, this scenario could increase selling pressure, especially if US bond yields rise. Conversely, a lower CPI could ease rate tensions and give risk assets renewed momentum. It will now depend on how much the published figures differ from market expectations.

Bitcoin has already resisted the dollar once

A strong DXY is generally not good news for risky assets. When the dollar rises and US yields become more attractive, capital has more alternatives to stocks and cryptos.

September, however, produced an interesting anomaly. Bitcoin gained 6.14% during the month as the DXY also rose nearly 2%. The inverse relationship observed several times between the two markets temporarily weakened.

This resistance was already visible after September’s rate hike: Bitcoin moved relatively little despite the return of monetary tightening. October is less comfortable. Total crypto market capitalization has decreased about 1.4% since the start of the month according to data reported by BeInCrypto. Yields, oil, and the dollar continue to weigh on risk appetite. The DXY is therefore reaching an important level at the same time as the CPI. If it falls after inflation, Bitcoin would lose one of its macroeconomic headwinds. If it clearly breaks its recent high, September will have simply offered a first glimpse of Bitcoin’s resilience. This time, the dollar is even higher.