Dollar Index – FOMC Rate Decision Set to Determine New Direction
The dollar index remains in a sideways trend for the third consecutive day, trading within a narrow range just above a new multi-month low.
Short-term price action has slowed ahead of a key event—the Fed’s interest rate decision—which is expected to set the tone for the next market direction.
On the daily chart, the technical outlook remains firmly bearish. Negative momentum continues to build, with moving averages in a bearish alignment (a freshly formed 10/20-day MA bear cross and the 100/200-day MAs on the verge of forming a death cross). This configuration reinforces downside pressure and supports the case for further bearish continuation.
However, to resume the broader downtrend, bears need to decisively break the key support levels at 100.33/100.00 (the 200-week MA and psychological threshold). A break below this would shift focus to the next technical support at 98.92 (the 61.8% Fibonacci retracement of the 2021/2022 uptrend from 89.15 to 114.72).
Immediate resistance is seen at 100.68 (the top of the recent range), with the 101.00 area (round number and falling 10/20-day MAs) marking the first pivot point. Bears are likely to stay in control as long as the price remains below this level, while a break above would signal an initial warning of a potential reversal.
The Fed is expected to begin easing its monetary policy, marking the first rate cut in over four years. However, there is considerable uncertainty regarding the size of the cut, with recent sentiment swings reflecting expectations for either a 25 or 50 basis point reduction.
In recent days, the odds of a larger 50 basis point cut have risen significantly, driven by growing concerns that the U.S. economy may be in worse shape than initially anticipated. If the Fed opts for a more aggressive cut, it could put renewed pressure on the dollar.
Markets will also closely watch the tone of the Fed’s statement and the follow-up press conference, as well as any signals regarding future policy moves. Expectations are growing for more than 100 basis points of cuts by the end of the year, which will further shape the outlook.
