U.S Dollar Wait On FOMC Rate Decision

Traders have been anxiously awaiting the September Federal Open Market Committee rate decision since the Fed first talked about tapering at the July meeting.

Meeting minutes from the July FOMC meeting showed that most members felt it would be appropriate to start reducing bond purchases by the end of the year. As a result, September becomes a key date.

Dollar prices were relatively firm on Wednesday as currency experts predict the greenback could struggle to advance as investor sentiment improves in light of the improved pandemic situation.

As investors contend with economic headwinds, including those in China, the greenback has continued to rise in value. The dollar is likely to slip lower in the near term, however, as pandemic uncertainties dissipate.

Against a trade-weighted basket of six major currencies, the U.S. dollar index got over 93.2 index points.

As a strong dollar theme is taking shape, prices of the US Dollar Index (DXY) are rising. Similar themes have developed, but then came crashing down. 93.72 is the yearly high, and a top-side trendline from the March high points to that level.

When resistance is rejected, we will likely see more volatile price action and a potential set-up for a trend reversal in the near term.

It is possible that the environment is changing towards higher volatility, and the stock market is already showing signs of weakening, so we could see a sustainable breakout to new yearly highs.

At the end of the Federal Reserve’s meeting on Wednesday, there shouldn’t be any major policy changes announced, but market jitters may result from Fed signals that one will be announced soon.

Prior to the end of the year, the Fed is expected to start scaling back its extraordinary monetary support. Initially, the Fed will slow its asset purchase program and then increase rates later.

Still, the vultures remain in flight as Treasury Secretary Janet Yellen warned that if Congress doesn’t raise the debt ceiling before the United States faces a “widespread economic catastrophe.” Paying Treasury bills is impossible due to insufficient cash.