US Dollar under pressure below 103.00 ahead of FOMC

The rally in the greenback has somewhat lost momentum on Wednesday, with the US Dollar Index (DXY) coming down to test lows near 103.00 the figure.

US Dollar looks to FOMC

The index has deflated from yesterday’s fresh tops in the vicinity of 103.80 recorded on Tuesday, levels last seen in December 2002, and is now challenging the 103.00 neighbourhood amidst a generalized softer tone surrounding the buck.

USD has been recently supported by auspicious results from the US manufacturing sector, with both Markit and ISM gauges coming in above expectations during December at 54.3 and 54.7, respectively.

Ahead in the session, the Dollar will remain in centre stage in light of the publication of the FOMC minutes from the December meeting, where the Federal Reserve hiked the Fed Funds by 25 bp, matching previous estimates.

Market bets keep pointing to a hawkish tone by the Committee today, while the projected 3 hikes during this year (‘dots plot’) and the potential overshooting of the Fed’s targets in both employment and inflation (in response to potential fiscal stimulus) could likely be in the centre of the discussion.

Somewhat capping the upside in DXY, USD speculative net longs remained around 2-week lows during the week ended on December 27, as shown by the latest CFTC report.

US Dollar relevant levels

The index is losing 0.31% at 102.91 and a breakdown of 102.62 (low Jan.3) would aim for 102.31 (20-day sma) and then 101.95 (low Dec.30). On the upside, the initial hurdle lines up at 103.81 (2017 high Jan.4) followed by 107.38 (monthly high Dec.2002) and finally 109.25 (monthly high Aug.2002).