US Dollar Price Forecast: FOMC Minutes May Stoke Bearish Bias

US Dollar Price Analysis and Chart:

• FOMC may allow inflation overshoot before even considering rate hikes.

• US dollar could test support levels.

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The US dollar is currently edging lower ahead of Wednesdays FOMC minutes and is likely to remain range bound ahead of the release. US Treasury yields have pulled back off their recent lows but still look set to drift lower, while the 2yr – 10yr curve is positive by 16bps, after having drifted into negative territory (inversion) over the past few weeks.

This month‘s FOMC minutes is expected to highlight the Fed’s current dovishness and indicate that interest rates will be kept at current levels for an extended period. Ongoing fears that global growth is slowing further will push the Fed towards erring on the side of caution before even considering hiking rates, especially after the last Fed dot plot was moved lower. While the robust job market growth will continue to please the Fed, growth is starting to fade lower and the central bank is likely to allow inflation to overshoot its target for a short-time before looking at any interest rate hikes.

US Dollar Weekly Technical Forecast: Can USD Bulls Post a Breakout？

The US dollar basket (DXY) is touching a 10-day low around 96.45 after Mondays sharp sell-off. Support starts between 96.28 and 96.39 and is based on the 20- and 50-day moving average and the March 26 high/March 28 low print. Just below here lies the 50% Fibonacci retracement of the January 2017 (103.80) to February 2018 (87.94) downswing at 95.86 and the 200-day moving average at 95.73.

US Dollar Weekly Forecast: ECB Meeting, US Inflation, Fed Minutes on Tap.

USD Daily Price Chart (July 2018 – April 9, 2019)