DXY Retreats from Two-Week High Ahead of Fed Decision

The US Dollar Index (DXY) has retreated from its two-week high but remains above 99.50 ahead of the highly anticipated Federal Reserve meeting on September 15-16.

Market analysts widely expect the Fed to raise interest rates by 25 basis points, marking the first hike in three years, and traders are eagerly awaiting updated economic projections and comments from Fed Chair Kevin Warsh during the post-meeting press conference.

The DXY's near-term tone remains capped as it holds beneath the 99.75-99.80 confluence of the 100-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement, with potential resistance levels at 100.08 and 100.45.

A surge in public and corporate borrowing has led to an extended global bond selloff, lifting the yield on the benchmark 10-year US Treasury bond beyond the 5% threshold for the first time since 2023, while escalating Middle East tensions continue to act as a tailwind for the safe-haven Greenback.

The geopolitical risk premium remains in play, suggesting that any corrective pullback in the DXY is likely to be bought into and remain limited, with initial support emerging at the 23.6% Fibonacci retracement around 99.27.