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  • Writer's pictureJin

Post FOMC : Bullish DXY

The DXY spiked higher from the 104.20 price level to 104.60 during the release of the FOMC interest rate decision and the press conference. The move higher has continued through the Asia session with the DXY now approaching the 105-round number level (around the 50% Fibonacci retracement level from the move yesterday).

This bullish move in the DXY is likely due to the FOMC adopting a conservative undertone during the news release. Key elements leading to the conservative tone:

  • "We don't see ourselves as having the confidence that would warrant policy loosening at this time"

  • "We need further confidence, more good inflation readings but won't be specific about how many to start rate cuts"

  • Indicating the potential of only 1 rate cut decision to come for the 2nd half of the year

  • "Rate cuts that might have taken place this year, take place next year"

If the economy progresses along its current path, the FOMC dot plot suggests that terminal rates for 2024 is likely to be 5.1%.

Adopting a conservative stance on rates for 2024 (which could be offset by a more aggressive rate decision in 2025, 4 cuts expected) is bullish for the DXY as it indicates that rates could remain high for longer.

Look for the DXY to continue climbing to the upside, toward the immediate resistance level of 105.60 (which coincides with the 61.8% Fibonacci retracement level from the longer term). And beyond 105.60, the DXY could retest the high from April at 106.40

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