Dollar index looks to Fed decision for new direction signals
A shift in sentiment pushed the dollar index to its lowest level of the week during European trading on Friday, following a weekly high on Thursday afternoon. This movement came ahead of US economic data that weakened the dollar.
Recent price action has been relatively flat, oscillating above the new one-year low and the 200-week moving average as markets await the Fed’s policy meeting next week for direction on the dollar’s trajectory.
The Fed is expected to begin cutting interest rates at its upcoming meeting, but the extent of the cut remains uncertain, with speculation fluctuating between a 25 or 50 basis point reduction based on the latest economic data.
If the Fed opts for a more substantial cut, the dollar could decline further, with key support levels at 100.30/00 (200-week moving average/psychological) potentially giving way to targets at 99.20/98.92 (July 17, 2023 low/Fibonacci 61.8% retracement of 89.15/114.72 uptrend).
Conversely, if the Fed disappoints with only a 25 basis point cut, the dollar might strengthen, but a sustained break above the recent range top at 101.85 will be necessary to reignite bullish momentum.
Res: 101.22; 101.50; 101.86; 102.21
Sup: 100.86 100.49; 100.30; 100.00
