The US dollar index (DXY) is in a tight range as investors wait for the Federal Reserve interest rate decision. The index is trading at $93.23, which is slightly below this week’s high of $93.45.
The FOMC will conclude its two-day monetary policy meeting on Wednesday and deliver its decision. The statement will be followed by a press conference where Jerome Powell will answer questions from the media.
The bank is expected to leave interest rates unchanged in this meeting. It is also expected to leave its quantitative easing policies intact. This means that it will continue buying $120 billion worth of bonds and mortgage-backed securities.
The key mover for the US dollar index in this meeting will be the bank’s dot plot, which will provide signals about when it will hike interest rates. Also, the program for the bank’s tapering will also have an impact on the DXY index.
The decision comes at an interesting time for the US economy. On the one hand, there are concerns about the country’s debt ceiling, where Congress has been deadlocked.
At the same time, economic numbers have been relatively strong, with the unemployment rate falling and inflation remaining above the target of 2.0%. Therefore, the bank will likely maintain its view that tapering will happen later this year.
US dollar index forecast
Turning to the daily chart, we see that the DXY index has found a strong resistance level lately. It has struggled to move above the key resistance at $93.40. Also, it seems like it is completing the performance of the handle section of the cup and handle pattern. The index is above the 25-day and 50-day moving averages.
Therefore, there is a possibility that it will maintain its bullish trend in the near term. If this happens, the next key level to watch will be at $94, which is about 1% above the current level. On the flip side, a move below $93 will invalidate this view.