DXY pulled back to the support area again ahead of the FOMC

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of six major global currencies, closed slightly lower on Tuesday as traders adjusted their positions ahead of the upcoming US Federal Open Market Committee (FOMC) meeting. The dollar has experienced a downward trend over the past two trading sessions following a fresh two-month high last week. Despite this recent meltdown, there remains potential for the dollar to resume an upward trajectory, contingent upon the remarks made by the new Federal Reserve chair today.

A highly volatile North American session is ahead for the USD

The primary focus for the dollar today is the Federal Reserve’s policy announcement and the initial comments from Kevin Warsh, the new Fed chair. Market forecasts suggest that the chair's statement could significantly influence the direction of the index. In addition to the Fed meeting, investors should closely monitor the release of key economic data, including US retail sales and pending home sales figures. The US retail sales report for May is scheduled for release at 12:30 GMT, with consensus expectations indicating a 0.5% increase.

Dollar Index Technical Forecast: DXY consolidates within a narrow range

The USD closed near the support line on Tuesday. The level of 99.30 is likely to attract significant market interest, so we should monitor it closely. If sellers maintain control at this level, the pair may test 99.00. Conversely, within the same timeframe, bulls must return to the vicinity of the 100-resistance level to change the current correction outlook. Furthermore, the chart below reveals a few key levels that act as the areas of supply and demand.

Conclusion: The US Dollar Index continues its pullback, struggling to establish a clear long-term direction as it oscillates within a narrow trading channel. It is important to note that this pullback does not necessarily indicate a breakdown. The index may find support and attract buyers at lower levels, with the 99.30 to 99.00 range serving as a potential strong floor for the market.

 

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