DXY to remain sideways ahead of FOMC outcome

The main important event that has the power to drive all the markets is the next week's Federal Open Market Committee (FOMC) meeting outcome. The Fed policy is due on Wednesday, Jul 28 and ahead of that new will see the US dollar bulls and bears battling for directional control. While, tonight is the US flash PMI data scheduled for release. Reuters expect the flash manufacturing PMI to fall to 62.7 from 63.9 in June. A better-than-expected US PMI data might see the dollar firm up some more - particularly if both employment and inflation components show signs of strength.

Since the June FOMC policy, the labour market, retail sales and inflation have all come in very strong. But with easing of restrictions and the US economy opening up for summer, the rise in COVID cases will be a valid concern for the Fed and the officials can communicate a dovish stance, weighing on dollar. However, a hawkish commentary from Federal Reserve about the future path of their monetary policy will be dollar positive.

As seen in the daily chart, US Dollar Index (DXY) is trading just above the top-to-top trend line at 92.86. On upside, strong resistance zone lies at 93.20-93.45. Only a consistent trading above 93.45 will open doors for 94.30-94.50 areas. However, if it respected 93.20-93.45 zone then immediate support is at 92.75 and strong support is at 92.50 (bottom-to-bottom trend line as well as Bollinger band's medium support level). If it sustains below 92.50, then further fall can be seen till 91.90-91.50-90.95.