- USD sees continuous rise with keen eye toward FOMC meeting, prolonging its third consecutive day of gains.
- US economic outlook remains strong and investors await fresh economic forecasts from the FOMC.
- Markets anticipate hawkish tone on Wednesday’s Fed decision.
On Tuesday, the US Dollar Index (DXY) saw an upward trend toward the 105.36 area. The session won’t provide any highlights as cannons are pointing to Wednesday’s session.
The two-day Federal Open Market Committee (FOMC) meeting, which kicked off on Tuesday and will end on Wednesday, is eyed by market observers. Any changes to the interest rate outlook or guidance by Federal Reserve (Fed) members are bound to stir market movements. The outcome of the famous dot plot will also be closely watched.
Daily digest market movers: DXY gains further ground on quiet Tuesday, eyes on FOMC
- Updated dot plots will provide valuable insight. A single shift from three interest rate cuts to two by a Fed policymaker could potentially elevate the 2024 median from 4.625% to 4.875%.
- Markets expect a seemingly 'hawkish hold' from the Fed, keeping rates at 5.5%.
- Consequently, the odds of a September cut appear to be a 50:50 chance, and November cut odds stand at approximately 85%.
- US will also release inflation data on Wednesday. The core Consumer Price Index (CPI) for May is forecast to decelerate slightly to 3.5% YoY, while headline inflation is anticipated to remain steady at 3.4%.
DXY technical analysis: Fundamentals on Wednesday to stir trajectory
Indicators on the daily chart remain strong, and both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) jumped to positive terrain. Additionally, the Index recovered above the 20, 100, and 200-day Simple Moving Averages (SMA), which brightened the outlook for the short term.
Fundamental stimulus on Wednesday will dictate the pace of the next sessions, and markets should eye the 106.00 area in case the DXY faces bullish pressure. On the downside, the 104.50 area remains as a strong support.
