Dollar Drops Notably Ahead of FOMC Decision

21 / 03 / 2018
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A sudden selling wave has hit the US dollar on Wednesday and the dollar index was down 0.35% during the London session, seen dropping to the 90 level again.

Later in the day, the FOMC will decide about monetary policy and the market broadly expects another 0.25% rate hike. The only question is whether the FOMC “dots” will rise enough to indicate 4 rate hikes in 2018, or stay at 3, and whether the Fed will change the FOMC day format to add a press conference after every meeting.

Therefore, a 25bps hike to 1.50-1.75% is already priced in. More interest will be on how many hikes the FOMC projects in 2018. Currently, only three rate hikes are priced in and if the FOMC sounds hawkish, it might be a bullish impetus for the greenback.

The dollar index failed to breach the upper trend-line and is now correcting lower. Therefore, the resistance is seen at 90.40 and if the index breaks beyond, we could see a bigger relief rally, targeting March highs near 91.00.

On the other hand, the strong support is at the bullish trend line around 89.80 and if not held, the greenback could deteriorate toward 89.60 or possibly to the current cycle lows near 89.40. In all cases we strongly recommend to have rigorous money and risk management.

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