DXY at a Crossroads: Bearish Momentum or a Reversal Ahead? | Errante
Market Overview
The US dollar index stays under intense selling pressure as traders await the Federal Reserve’s interest rate decision. While policy rates are expected to remain the same, the Fed’s updated economic projections could dominate the market sentiment. The index remains consolidating around 103.50 with a bearish outlook as political and economic uncertainties prevail.
Fundamental Analysis
The Federal Reserve is widely anticipated to hold rates at 4.25% – 4.5% in today’s policy meeting. However, Fed officials could adjust their future policy outlook. The US economic momentum seems to be fading as sentiment surveys, NFP, CPI, PPI, and retail sales data were disappointing. Moreover, uncertainty around trade tariffs and fiscal policies adds volatility to the market as investors speculate on the Fed’s response to inflationary risks.
Fed Chair Powell has reiterated the need for the wait-and-watch approach, stressing that the central bank is not in a rush to cut rates. Despite broader expectations for two to three rate cuts in 2025, some analysts anticipate a delay in easing, mainly if inflation stays stubborn. Traders will also monitor the Summary of Economic Projections (SEP) and dot plot for more clues on future monetary policy outlook.
Technical Analysis
The US dollar index remains technically bearish, trading under the 100-day EMA. The RSI value on the daily chart is around 30, which suggests the index is around the oversold zone, but still, sellers have the upper hand.
The immediate support lies at 103.20 ahead of 102.00, which is a psychological level. A further break below could propel towards key level of 101.84. On the upside, immediate resistance lies at 104.10 ahead of 105.45 and then 100-day EMA at 106.10.
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