- The DXY index extends the sideways move in the 103.50 region.
- US yields resume rally ahead of FOMC event.
- The Fed is expected to raise the benchmark rate by 50 basis points on Wednesday.
The US dollar index DXYwhich measures the strength of the dollar against a basket of major currencies, alternate gains with losses in the region of 103.50 at the start of the European session on Wednesday.
DXY index focuses on the Fed and Powell
The DXY index is trading around 103.50 and moving with no clear direction on Wednesday as market participants await the FOMC decision later in the day.
On the FOMC decision, the Committee is expected to raise the Fed Funds Target Range (FFTR) by 50 basis points to 0.75%-1.00%, as has already been greatly valued in the market. However, most of the attention is expected to fall on Powell’s subsequent press conference. The spotlight will be on Powell’s comments on the Fed’s rate path and the start of the Fed’s balance sheet reduction.
In the US cash markets, yields resume risewith the 2-year note trading at levels last seen in December 2018 and the benchmark 10-year index hovering around the key 3.00% level.
Also, it’s a busy day in the US data space as MBA Mortgage Applications, ADP Jobs Report, Trade Balance, Services PMI and ISM Non-Manufacturing will also be released. .
What can we expect around the USD
The DXY index is trading in a range ahead of the FOMC event later on Wednesday. The Fed’s more aggressive rate path continues to be the main driver behind the US dollar’s strong bullish stance, which also seems bolstered by ongoing fears of elevated inflation and strong labor market health. Also contributing to the rise in the dollar are the latest geopolitical tensions, as well as the upward movement in US yields.
Relevant DXY US Dollar Index Levels
At time of writing, the DXY index is up 0.06% on the day, trading at 103.51. A break above 103.92 (28 Apr 2022 high), would open the door to 104.00 (round level) and 105.63 (11 Dec 2002 high). On the other hand, next support appears at 102.81 (29 Apr low), followed by 99.81 (21 Apr low) and 99.57 (14 Apr low).
Source: Fx Street
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