US Dollar cut losses, rebounds from 95.40

The greenback, tracked by the US Dollar Index (DXY), has managed to quickly leave behind session lows in the 95.40 area and is now looking to regain the upper-95.00s.

US Dollar weaker after FOMC

The index has briefly tumbled to 3-day lows in the 95.40/35 band after the Federal Reserve left the Fed Funds unchanged at 0.25%-0.50% at today’s meeting, broadly in line with market consensus.

Members voted 7-3 to leave the current monetary status quo (Mester, Rosengren, George were dissenters), while the statement pointed to one rate hike by year-end. Members have also reiterated that the case for higher rates have strengthened, although more evidence seems to be needed before hiking.

The Committee has also revised lower its GDP forecasts for the current year, now expecting the economy to expand 1.7%-1.9% vs. 1.9%-2.0% estimated in June. Members have also updated the ‘dot plot’, now seeing 2 rate hikes during 2017 vs. June’s 3 hikes.

At her press conference, Chief Janet Yellen emphasized the good pace of the economic recovery and in particular the labour market, while she suggested that on the current course some gradual hikes will be warranted.

She also stressed that the November meeting will also be ‘live’, while she refused to comment on politics (when asked about the upcoming US elections).

US Dollar relevant levels

The index is retreating 0.25% at 95.75 and a break below 95.38 (post-FOMC low Sep.21) would open the door to 94.76 (support line off 2016 low) and finally 94.44 (low Sep.8). On the flip side, the next up barrier aligns at 96.29 (spike post-BoJ Sep.21) followed by 96.50 (high Aug.5) and then 96.78 (23.6% Fibo of July-August drop).