Market Analysis

The US Dollar (USD) shows a subdued performance in Wednesday’s European session ahead of the Federal Reserve's (Fed) monetary policy announcement at 18:00 GMT. The US Dollar Index (DXY), which measures the Greenback against six major currencies, edges lower to around 104.40. Meanwhile, 10-year US Treasury yields remain flat near a four-month low of approximately 4.14%, as investors expect the Fed's policy outcome to be unfavorable for maintaining a restrictive interest rate framework.

Market expectations are that the Fed will keep interest rates steady in the 5.25%-5.50% range for the eighth consecutive meeting. However, communication on future rate guidance is anticipated to be dovish, reflecting cooling inflationary pressures and a moderating labor market in the United States (US).

In a note, Unicredit Research stated, "The Fed will likely leave rates unchanged but send a clear signal that it's getting closer to cutting rates and could do so as soon as September."

Technical Analysis: US Dollar Faces Resistance Near 50-day EMA

The USD Index is trading within a Symmetrical Triangle formation on a daily timeframe, indicating a sharp contraction in volatility. This chart pattern typically leads to a sideways trend with lower volume and smaller price movements. The near-term trend remains bearish, with the 50-day Exponential Moving Average (EMA) around 104.77 acting as a significant barrier for US Dollar bulls.

The 14-day Relative Strength Index (RSI) oscillates between 20.00 and 60.00, suggesting an overall bearish trend, although the bearish momentum is currently inactive.

On the upside, key resistance levels for the US Dollar are the July 9 high at 105.20 and the three-month high near 106.00. On the downside, important support levels include the July 17 low at 103.65 and the March 8 low at 102.35.

Paraphrasing text from "FX Street" all rights reserved by the original author.