Dollar Tests Major Resistance Ahead of FOMC Rate Decision
The US dollar is experiencing a significant shift in its technical outlook as it tests major resistance levels ahead of the Federal Reserve's rate decision. According to Michael Boutros, FOREX.com Senior Market Analyst, the DXY dollar index has broken above a multi-year downtrend line for the first time last week. This development suggests that the move may be gaining momentum.
Boutros points out that a weekly bearish divergence is forming on the DXY, indicating potential weakness in the dollar's rally. However, with the Federal Reserve poised to make a decision on interest rates, markets are pricing in a real chance of a rate hike alongside roughly even odds of a hold. This uncertainty is contributing to the dollar's volatility.
As traders await the Fed's decision, they are closely watching inflation data and any changes in communication from key officials like Kevin Warsh, who has been a vocal advocate for caution in monetary policy. With no updated projections from the FOMC July meeting, every word on inflation will be parsed by market participants.