USD Index adds to recent losses below 102.00 on FOMC day

The index loses further ground and retests 101.70.
The Fed is largely anticipated to hike rates by 25 bps.
ADP report, ISM Services PMI next of note in the docket.

Pablo Piovano FXStreet

The USD Index (DXY), which tracks the Greenback vs. a bundle of its main rivals, adds to Tuesday’s losses and extends the recent breach of the 102.00 support on Wednesday.

USD Index now looks at FOMC, data

The index retreats for the second session in a row and extends Tuesday’s rejection from multi-day highs around 102.40 on the back of the improved sentiment in the risk complex and steady cautiousness among investors ahead of the FOMC event.

On the latter, the Federal Reserve is broadly expected to raise the Fed Funds Target Range (FFTR) by 25 bps to 5.00%-5.-25%. The focus of attention, however, has shifted to the usual press conference by Chief Powell, where the future moves regarding the rate path will take centre stage.

Other than the FOMC gathering, the US docket will show weekly Mortgage Applications by MBA, the monthly ADP Employment Change, the final Services PMI tracked by S&P Global and the ISM Services PMI.

What to look for around USD

The index corrects lower from recent tops around 102.40 ahead of the key FOMC meeting due later in the NA session.

Looking at the broader picture, the index continues to navigate in a consolidative phase against steady expectations of another rate increase in May by the Fed and rising cautiousness in light of the potential next decisions by the Fed in the next months.

In favour of a pause in the Fed’s hiking cycle following the May event appears the persevering disinflation and nascent weakness in some key fundamentals, which at the same time feeds the spectre of a probable recession.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change, Final Services PMI, ISM Services PMI, FOMC Meeting, Powell press conference (Wednesday) – Balance of Trade, Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change.

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is losing 0.20% at 101.72 and faces immediate support at 101.01 (weekly low April 26) prior to 100.78 (2023 low April 14) and finally 100.00 (psychological level). On the other hand, a break above 102.80 (weekly high April 10) would open the door to 103.05 (monthly high April 3) and then 103.13 (100-day SMA).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.