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James Hyerczyk
US Dollar Index

The U.S. Dollar is inching slightly higher against a basket of major currencies early in the session on Wednesday as traders prepare for the release of the U.S. Federal Reserve’s latest monetary policy decisions at 19:00 GMT.

The greenback was pressured on Tuesday as risk sentiment rose, dampening the dollar’s appeal as a safe-haven asset. Some of the weakness was fueled by optimistic comments from the International Monetary Fund (IMF), which upgraded its forecast for 2021 global growth.

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At 08:38 GMT, March U.S. Dollar Index futures are trading 90.200, down 0.052 or -0.06%.

Gains could be capped on Wednesday if the Fed renews its commitment to ultra-easy policy. Fed Chairman Jerome Powell is likely to reiterate that he doesn’t see any near-term exit from their very easy policy stance. This should keep the pressure on the greenback or at least limit any short-term gains.

Additionally, dollar traders are also monitoring the movement in Treasury yields, whose rise had supported the dollar at the start of this year. The green back was pressured on Tuesday by a drop in Treasury yields amid caution about the eventual size of and potential delays to President Joe Biden’s $1.9 trillion fiscal stimulus plan.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the swing top, but the lack of follow-through to the upside after the change in trend on January 15 suggests the recent attempted breakout to the upside may have been fueled by buy stops rather than aggressive buyers.

If Treasury yields had continued to strengthen, the dollar index would’ve probably extended the uptrend.

A trade through 90.940 will signal a resumption of the uptrend, while a move through 90.030 will change the main trend to down.

The minor range is 90.940 to 90.030. Its retracement zone at 90.490 to 90.590 is resistance. This zone stopped the rally at 90.595 on Tuesday.

The short-term range is 89.165 to 90.940. Its retracement zone at 90.055 to 89.845 is potential support, while the lower or Fibonacci level at 89.845 is a potential trigger point for an acceleration to the downside.


Daily Swing Chart Technical Forecast

The early price action suggests the direction of the March U.S. Dollar Index will be determined by trader reaction to 90.055.

Bullish Scenario

Holding above 90.055 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into 90.485 followed by the resistance cluster at 90.590 to 90.595. The latter is a potential trigger point for an acceleration into another resistance cluster at 90.940 to 94.950.

Bearish Scenario

A sustained move under 90.055 will signal the presence of sellers. Taking out 90.030 will change the main trend to down with the next targets coming in at 89.890 and 89.845.

The short-term Fibonacci level at 89.845 is a potential trigger point for an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.
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