- As the FOMC meeting approaches, the USD continues to strengthen, extending its winning streak to three days in a row.
- Investors are awaiting the FOMC’s next economic projections, and the US economic outlook is still positive.
- The markets are expecting the Fed to make a hawkish conclusion on Wednesday.
The US Dollar Index (DXY) trended higher on Tuesday, moving closer to the 105.36 region. There won’t be any highlights from this session because the focus is on Wednesday’s session.
Market watchers are keeping a close eye on the Federal Open Market Committee (FOMC) meeting, which is scheduled to conclude on Wednesday after it began on Tuesday. Market fluctuations are inevitable when Federal Reserve (Fed) members alter their perspective or direction on interest rates. There will also be great attention on the conclusion of the renowned dot plot.
Everyday digest market movers: calm Tuesday helps DXY gain further territory, with attention focused on FOMC
- Redesigned dot plots will offer insightful information. The 2024 median may rise from 4.625% to 4.875% if a Fed policymaker were to switch from three to two interest rate reductions.
- The market is anticipating a ‘hawkish hold’ from the Fed, which would maintain rates at 5.5%.
- As a result, the chances of a September cut seem to be 50/50, while the chances of a November cut are almost 85%.
- On Wednesday, the US will also announce inflation figures. While headline inflation is expected to stay stable at 3.4%, the core Consumer Price Index (CPI) for May is predicted to slow down slightly to 3.5% YoY.
Technical analysis of DXY: Wednesday’s fundamentals will change the trajectory.
The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) have surged to positive territory, and the daily chart’s indicators are still strong. The short-term prognosis improved as the Index also bounced back above the 20, 100, and 200-day Simple Moving Averages (SMA).
The pace of the upcoming sessions will be determined by the fundamental stimulus on Wednesday; in the event that the DXY is under positive pressure, traders should be watching the 106.00 region. On the down side, there is still significant support in the 104.50 region.
