US Dollar Price Outlook Talking Points:
US Dollar Primed for FOMC
Fed day is finally here[1], and there’s little more to write on the matter given the intense focus this item has received over the past couple of weeks. The general expectation is for the Fed to be more dovish at today’s meeting. The item of importance is just how dovish they might be, and this will likely be transmitted through the bank’s (SEP) Summary of Economic Projections. Markets have come to expect three hikes by the end of this year. So far, the Fed hasn’t forecasted any cuts; although the trend has been moving lower since the bank’s forecast for two hikes at last December’s meeting was cut down to zero at the March rate decision. The most recent FOMC meeting concluded on May 1, which correlates to the start of last month’s pullback in risk assets like the S&P 500[2]. Stocks sold off for the remainder of the month, only finding support a couple of weeks ago as volatility started to show up in FX markets.
Early in June the fireworks started to show in the US Dollar[3] after a dovish speech by Jerome Powell. That theme lasted for all of a week; at which point buyers came back-in after a big level of technical support came into play. Since then, buyers have been doing the driving, and price action has already retraced a large portion of that previous bearish move. At this point, the same 97.70 level that set resistance tops[4] in November, December and March has come back into play as pre-FOMC resistance.
US Dollar Daily Price Chart
Chart prepared by James
