US Dollar bounces off lows, still depressed near 93.30

After bottoming out in levels last seen in May 2016 in the 93.00 neighbourhood, the US Dollar Index seems to have found some respite and is now retaking the 93.25/30 band.

US Dollar (very) offered post-FOMC

The bearish trend in the buck has intensified further on Wednesday after investors perceived as dovish the recent FOMC meeting.

In fact, the Committee acknowledged the inflation is running below the Fed’s target, although the statement leaves the door open for the Fed to start reducing its balance sheet ‘relatively’ soon.

The (not hawkish) statement seems to have lent support to the view that the Fed might not hike a third time this year, although analysts at Danske Bank suggested “Due to the Fed’s strong belief in the Phillips curve and given we expect a further tightening of the labour market, we think the Fed will hike one more time this year in December”.

At the moment, CME Group’s FedWatch tool sees the probability of another hike at the December 13 meeting at just below 47%, based on Fed Funds futures prices.

In the US data space today, the usual weekly report on the labour market is due seconded by June’s goods trade balance and durable goods orders.

US Dollar relevant levels

The index is losing 0.04% at 93.25 facing the next support at 93.00 (2017 low Jul.27) seconded by 92.52 (low Aug.24 2015) and finally 91.88 (2016 low May 3). On the other hand, a surpass of 94.09 (10-day sma) would open the door to 94.92 (21-day sma) and then 95.55 (23.6% Fibo of the 2017 drop).

Additionally, the index is trading well into the oversold territory as indicated by the daily RSI (14) currently at 23.