- DXY edges higher and trades closer to the 99.00 handle.
- The Fed cut rates by 25 bps at Wednesday’s meeting.
- Chief Powell noted that further rate cuts are unlikely this year.
The Greenback, in terms of the US Dollar Index (DXY), is navigating fresh YTD tops in the vicinity of 99.00 the figure, area last visited in mid-May 2017.
US Dollar Index bid after FOMC, looks to ISM
The rally in DXY remains everything but abated so far today, and particularly after the Federal Reserve gave extra wings to the buck in the wake of yesterday’s decision to reduce the Fed funds Target Rate by 25 bps to 2.00%-2.25%, matching the broad consensus among investors. The rate cut was considered by the Fed as a mid-cycle 'adjustment'.
The decision to cut rates, however, was not unanimous, as Boston Fed E.Rosengren and KC Fed E.George voted for a no move on rates. Following Chief Powell’s press conference, the Fed is now likely to remain data-dependent and in a ‘wait-and-see’ mode, removing expectations of further rate cuts later this year. The Fed also signaled that it plans to end the Balance Sheet Reduction next month (vs. October 2019 previous).
Moving forward, the Greenback should remain in centre stage in light of the publication of the key ISM Manufacturing for the month of July seconded by usual weekly Claims, Challenger Job Cuts and the final manufacturing PMI from Markit.
US Dollar Index relevant levels
At the moment, the pair is gaining 0.24% at 98.80 and faces the next resistance at 98.93 (2019 high Aug.1) seconded by 99.89 (monthly high May 2017) and finally 100.00 (psychological level). On the flip side, a break below 98.37 (high May 23) would open the door to 97.87 (61.8% Fibo of the 2017-2018 drop) and then 97.27 (55-day SMA).
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