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US Dollar Index looks consolidative around 97.50 ahead of FOMC

2019-06-19 20:45

  • DXY recedes to the mid-97.00s and stabilizes around the area.

  • US 10-year yields rebound to the 2.10% region from sub-2.02%.

  • FOMC meeting coming up next with rate cuts in centre stage.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rivals, is losing some ground today after Tuesday’s peaks in the 97.70 zone.

US Dollar Index cautious ahead of FOMC

After five sessions with gains, the index has now entered into the negative territory and looks to consolidate in the 97.50 region ahead of the upcoming critical FOMC meeting.

The improved mood in the risk-associated complex has been weighing on the buck since yesterday and particularly after President Trump said he will likely meet with his Chinese peer at the G-20 meeting in Japan next week. The news helped to alleviate trade concerns and lifted US yields from recent lows.

In the meantime, the greenback is expected to remain under the microscope at today’s FOMC event, especially against the backdrop of increasing speculations of a potential rate cuts by the Fed in the near term. In addition, investors will closely follow the new ‘dots plot’, which should see no rate hikes this year and 2020.

What to look for around USD

Markets participants will closely follow today’s FOMC meeting, where the new ‘dots plot’ is expected to show no rate hikes this year and the next one. The subsequent press conference by Chief J.Powell is also predicted to reinforce the dovish message at the event, emphasizing the goal of ‘sustaining expansion’. However, and in spite of some disappointing results in US fundamentals as of late, the labour market remains strong, wage growth keep pushing higher and the overall economy looks healthy - specially when we consider the weakness in overseas economies – all begging the question whether current speculations of rate cuts are not somewhat overdone.

US Dollar Index relevant levels

At the moment, the pair is losing 0.06% at 97.58 and a breach of 96.46 (low Jun.7) would open the door for 96.04 (50% Fibo of the 2017-2018 drop) and then 95.82 (low Feb.28). On the other hand, the initial hurdle emerges at 97.80 (monthly high Jun.3) seconded by 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 98.37 (2019 high May 27).

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