The US Dollar Index (DXY) fell towards the 103.50 area following the Federal Reserve’s (Fed) decision to hold interest rates at 5.25-5.50%, in line with expectations. Despite upward revisions to economic activity and inflation forecasts, the median projected interest rate remained at 4.6%, triggering a positive market reaction.
Key Takeaways:
- Dovish Interpretation: Markets reacted with a bullish sentiment to the unchanged rate outlook, driving stocks higher and pressuring Treasury yields and the USD.
- Powell’s Comments Fed Chair Powell emphasized that recent inflation data doesn’t alter the broader disinflationary progress, suggesting the Fed won’t overreact.
Technical Outlook:
- Bearish Shift: The DXY exhibits bearish signals, with the RSI sloping downward and flat green MACD bars adding to the negative bias.
- SMA Break: Sellers have pushed the DXY below the convergence of the 20, 100, and 200-day SMAs around 103.50, a critical support area.
Next Steps:
- Bulls’ Challenge: To regain momentum, bulls need to reclaim the SMA confluence and consolidate above 103.50.
