US Dollar (DXY) Index News: Greenback Under Pressure Ahead of Fed Rate Decision

U.S. Dollar Index Overview

The U.S. dollar showed mild weakness early Monday, influenced by a Japanese holiday, while major currencies like the yen, euro, and sterling remained at recent lows following last Friday’s significant fluctuations.

At 15:25 GMT, the U.S. Dollar Index is trading 105.727, down 0.365 or -0.34%.

Yen’s Position and Market Expectations

Japan’s yen improved modestly to 158.05 per dollar, benefiting from quieter trading due to Tokyo’s market closure for the Golden Week holidays. This minor gain contrasts sharply with Friday’s wide swings, which occurred after the Bank of Japan opted to maintain its current policy, causing a rapid depreciation of the yen.

Upcoming Federal Reserve Decision

Attention is now turning towards the Federal Reserve’s upcoming policy review on May 1. With a series of strong U.S. inflation reports and comments from Fed Chair Jerome Powell, the market anticipates the central bank will postpone any interest rate cuts. The expectations have shifted, with most investors predicting a potential rate cut not before November.

Treasury Yields and Economic Indicators

Yields on U.S. Treasuries saw a decline on Monday, as anticipation builds for the Fed’s decision and forthcoming economic data. The 10-year Treasury yield dropped around 5 basis points to 4.62%, indicating a cautious investor sentiment ahead of significant updates.

Short-Term Market Forecast

As the market braces for the Fed’s rate decision, closely-watched for any directional cues on monetary policy, the dollar may continue to exhibit volatility. The broader expectation is for the Fed to maintain rates, which could stabilize the dollar in the short term. However, any surprises in the Fed’s tone or decision could sway the dollar index more sharply. With major data releases like the April jobs report on the horizon, traders should prepare for potential shifts driven by economic indicators and central bank policies.

Technical Analysis

The intermediate and long-term trends are up, but the short-term trend is down, meaning momentum is pointing lower.

A trade through 105.414 will reaffirm the weak short-term trend. If this creates enough downside momentum then we could see an acceleration into the 50-day moving average at 104.389, followed by the 200-day moving average at 104.080.

On the upside, the resistance is a pivot at 105.970. This price is controlling the near-term direction of the market.