The greenback rose on Tuesday in anticipation of hawkish FOMC later tonight, and it was bid on Wednesday as well, rising slightly and trading around 94.00 for the dollar index.
Yesterday’s inflation numbers surprised on the upside and the year-on-year CPI inflation rose significantly to 2.8% in May from 2.5% in April. The core indicator also advanced to 2.2%. The greenback strengthened slightly after these numbers.
The focus now turns to the outcome of the FOMC meeting. While the fed is seen rising rates again, it has been already priced in. The key focus would on updated economic projection, especially the so-called ‘dot-plot’. Any hints of more than 3 rate hikes already priced in the market should be positive for the greenback.
The dollar index managed to defend previous highs of 93.50 and jumped higher, which is a sign of the continuing bullish trend. The next resistance now stands around 94.25 and if bulls will be stronger, we may see a rise toward the actual cycle highs near 95.00.
On the downside, should the FOMC sound dovish, the greenback could decline to the mentioned support of 93.50 and if not held, further deterioration to the 93.00 level could occur. In all cases we strongly recommend to have rigorous money and risk management.
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