This week, investors will focus on the US dollar index (DXY) as they analyze the recent nonfarm payrolls data and wait for the US inflation numbers for March. The index finished the previous week at $104.28, lower than the highest point of $105.08 reached earlier.

On Friday, the US dollar index moved as the US released strong economic figures. The Bureau of Labor Statistics reported an addition of over 300k jobs in March, lowering the unemployment rate to 3.8% from 3.9%. Wage growth also continued to increase.

Despite the positive numbers, an in-depth look revealed that many of the new jobs were part-time, with the government contributing significantly to job creation in recent months. Initially, analysts predicted a Federal Reserve rate cut in March, but now, the expectation is for a rate cut in July.

With favorable labor market conditions, focus now shifts to Wednesday's inflation data. Analysts anticipate an increase in the Consumer Price Index (CPI) from 3.2% in February to 3.4% in March, with core inflation expected at 3.7%.

Recent increases in crude oil prices, with Brent at $91 and West Texas Intermediate (WTI) at $87, hint at continued elevated inflation levels in the US, a contrast to Europe's decreasing inflation rate.

The US dollar index experienced a double-top setup at $104.97 last week following its peak at $105.08 before a pullback. While this pattern typically signals a bearish trend, the index remains above the 50-day Weighted Moving Average (WMA), showing a bullish outlook alongside a small hammer pattern indicating a bullish reversal.

Given the solid economic foundation, it is probable that the US dollar will rebound and retest the upper limit of the double-top formation at $104.97. The alternative outcome would be a bearish break below $104 with potential downward movement.