US Dollar Declines Ahead of FOMC Meeting

The US Dollar Index (DXY) has fallen to 105.70, with the Bank of Japan’s intervention causing a slight drop in the dollar’s value. However, the dollar’s rally is expected to continue due to monetary policy divergence favoring the US Dollar and the anticipation of a hawkish hold from the forthcoming FOMC meeting.

The US economy remains resilient, and sticky inflation may keep the USD’s rally alive. The Fed is expected to adopt a hawkish approach, underscoring hefty growth and sustained inflation in the US economy.

Unchanging interest rates and robust US data may maintain the upward trajectory of US Treasury bond yields. Market expectations for subsequent Fed meetings are 10% likelihood of a rate cut in June, 35% in July, and less than 80% in September.

US Treasury bond yields are down, signifying a disfavourable environment for the US Dollar. DXY technical analysis shows mixed outlook for the DXY. The Relative Strength Index (RSI) maintains a positive stance, indicating resilience among buyers.

The DXY remains above the Simple Moving Averages (SMAs), suggesting buyers still have an advantage in intermediate and longer terms, despite a potential shift towards bearish territory in the Moving Average Convergence Divergence.