Dollar Softer Ahead of FOMC Today
Dollar Down from Highs
The US Dollar remains down from recent highs today as traders brace for the latest rate setting meeting from the Fed. Ahead of the FOMC, DXY is down 1% from the fresh YTD highs printed on Friday. Given the heavy shift we’ve seen recently traders’ Fed expectations, today’s meeting will prove pivotal for USD direction near-term. If the Fed makes a hawkish shift as expected, warning of the inflationary risks linked to the Iran war, USD could push firmly higher again. However, if the bank strikes a more neutral tone, this could lead USD to unwind a little with bulls left disappointed.
Dot-Plot Projections & Powell Presser
Alongside the meeting statement and press-conference, traders will be looking to the updated dot-plot projections for a clear signal on how the Fed feels rates will develop over the target-horizon. Currently, the Fed is projecting just one cut this year with this forecast highly likely to shift to no cuts this year. This shift should support USD but the extent of any rally will depend on how hawkish Powell sounds in the press conference. If Powell sounds the alarm over soaring energy prices and inflationary risks, this could lead USD firmly higher. However, if Powell stresses caution and signals that energy swings can be absorbed for now, USD should continue to range beneath recent highs. If a rate cut is still projected next year (earlier better), this should temper any upside USD action. However, if there is any shift towards members projecting a hike within the target-horizon as a result of the war, this could send USD sharply higher.
Technical Views
DXY
The rally has stalled for now into a test of the 100.36 mid-2025 highs with price since recoiling from the level. While still above the 99.15 level, however, focus remains on a fresh push higher in line with bullish momentum studies readings. Only a break sub-99.15 will change that view, putting 98.24 and the channel retest in view.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.