The dollar retreats from a new multi-month high, likely reflecting positioning ahead of the Fed’s upcoming rate decision

The dollar index pulls back from a new four-month high of 105.33 reached on Wednesday’s sharp rally—the largest daily gain in two years—following news of Trump’s election victory.

Partial profit-taking has pushed the dollar lower, but its overall firm tone remains intact, with daily indicators still showing a bullish setup. This suggests that the current dip is merely a pause before a potential push higher.

The Fed’s two-day meeting concludes today, with its rate decision expected shortly. The outlook for monetary policy is evolving following Donald Trump’s win in the 2024 US presidential election. His campaign promises, focused on boosting economic growth, could drive inflation higher, necessitating a reassessment of the Fed’s rate strategy.

Market expectations are shifting toward fewer rate cuts in the near term and an earlier-than-expected end to the Fed’s easing cycle, which could further support the dollar.

Key support levels at 104.50/30 (former resistance and the daily Tenkan-sen) should contain any dips, maintaining the bullish momentum and paving the way for a possible move toward the June 28 peak at 105.87.

Res: 105.33; 105.87; 106.00; 106.36
Sup: 104.50; 104.30; 103.79; 103.64