With the FOMC monetary policy decision and press conference due later today, Wednesday, the US dollar has been consolidating. The USD Index made a fresh high on the year yesterday, at 84.52. Then, after retreating to 84.03, it has been holding in this range for about a week.
The fact that the 200-, 100-, and 50-hour simple moving averages are clustering inside of this range tells us the market is very tentative. It also makes a pending breakout easier to visualize.
Essentially, after a break either above or below the range, traders should look for the 1H SMAs as a support or resistance. For example, if price broke above 81.52, We should expect a subsequent pullback to hold above 84.25. If there is a break below 84.03, then a pullback should respect 84.25 if the market is indeed forming a bearish correction.
If the breakout after the FOMC event risk is to the downside, we have a bearish correction scenario for at least the short-term. However, we should expect some support in the 83.40-83.56 area, which includes a previous support pivot, and the 100-period SMA in the 4H chart. We should also look for buyers when the 4H RSI approaches 40.
Below 83.55, the 83.05 level, and previous resistance pivot could also be an area of support.
If the USDX does not fall below 83.00, we should still have a strong bullish bias. If price can hold above 84.00 after the FOMC, we should be even more confident of the bullish continuation outlook. However, we should note that the 2013 high is just above the current 2014-high, at 84.75. A break above 84.80 might be needed to open up even more bullish bias for the US Dollar Index.
Disclosure: Fan Yang, CMT is the chief currency analyst at forexminute.com
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U.S. Dollar Index Consolidating Ahead Of FOMC Risk
Published 09/16/2014, 11:23 PM
Updated 07/09/2023, 06:31 AM
U.S. Dollar Index Consolidating Ahead Of FOMC Risk
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