USD Index treads water around 105.20 ahead of FOMC

The index trades within a tight range just above 105.00.
The FOMC meeting will take centre stage later in the session.
The Fed is expected to keep rates unchanged on Wednesday.

Pablo Piovano FXStreet

The greenback attempts some consolidative move in the low 105.00s when measured by the USD Index (DXY) ahead of the opening bell in Euroland on Wednesday.

USD Index focused on the FOMC meeting

The index extends the side-lined trade above the 105.00 hurdle amidst scarce volatility and the usual pre-FOMC lull midweek.

That said, further range bound remains well on the cards in the next hours ahead of the key FOMC event due in the European evening.

Regarding the latter point, investors generally agree that the Federal Reserve will maintain its current interest rate. However, the focus is expected to shift to the central bank's forward guidance during Powell's press conference.

In the US data space, usual weekly Mortgage Applications tracked by MBA are also due later in the session.

What to look for around USD

The 105.00 zone so far emerges as a decent contention area for occasional bearish attempts in the index.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: MBA Mortgage Applications, Fed interest rate decision, Fed Press Conference (Wednesday) - Initial Jobless Claims, Philly Fed Index, CB Leading Index, Existing Home Sales (Thursday) – Flash Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is down 0.06% at 105.13 and the breach of 104.42 (weekly low September 11) would open the door to 103.03 (200-day SMA) and then 102.93 (weekly low August 30). On the flip side, the next up barrier aligns at 105.43 (monthly high September 14) seconded by 105.88 (2023 high March 8) and finally 106.00 (round level).

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 slides below 1.3250 after failing to break through 23.6% Fibo

The GBP/USD pair meets with a fresh supply during the Asian session on Wednesday and moves away from a nearly two-week high around the 1.3275 region, touched the previous day. Spot prices currently trade around the 1.3235 zone, down 0.20% for the day, as traders look to speeches from Bank of England Governor Andrew Bailey and Federal Reserve Chair Kevin Warsh for a fresh impetus.

EUR/USD keeps losses near 1.1400 after soft Eurozone inflation data

EUR/USD keeps the offered tone intact near 1.1400 in European trading on Wednesday, pressured by softer Euronze and German inflation readings and receding bets for aggressive tightening by the European Central Bank (ECB). Traders will take more cues from the US Manufacturing PMI due later in the day.

Gold stays in red below $4,000, awaits Warsh's speech

Gold remains under selling pressure below $4,000, in the red for the third straight day on Wednesday. The Iran uncertainty and Fed hike bets support the USD, weighing on the commodity. Traders now look to Fed Chair Warsh's speech and the US data for a fresh impetus.

ISM Manufacturing PMI expected to signal continued expansion in the US

Attention shifts to Wednesday’s release of the June ISM Manufacturing Purchasing Managers Index, one of the most closely followed indicators of activity in the US manufacturing sector and an important barometer of the broader economy. Markets expect the headline index to remain unchanged at 54.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The European Central Bank Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Federal Reserve, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.