US Dollar Index steady around 97.70 ahead of FOMC

• DXY navigates the area of Tuesday’s close around 97.70.
• The Fed is expected to reduce rates by 25 bps.
• Markets’ focus stays on Powell’s presser and forward guidance.

The Greenback, when gauged by the US Dollar Index (DXY), is trading within a tight range around 97.70 ahead of the key FOMC event later today.

US Dollar Index focused on Powell

The index is looking to stabilize in the lower end of the weekly range after being rejected from the 97.90 area in past sessions, region coincident with a Fibo retracement of the 2017-2018 drop.

The price action around the buck keeps looking to developments from the Brexit front, which have a direct impact on the sentiment surrounding the risk-associated complex.

In addition, some fresh concerns have re-emerged on the US-China trade context after news cited the recently clinched ‘Phase One’ deal could not be ready to sign next month in Chile.

Moving forward, market participants largely anticipate another 25 bps ‘insurance’ cut at today’s FOMC event, although the focus of attention will likely stay on the Fed’s forward guidance for the next months and the press conference by Chief Powell.

What to look for around USD

The upside momentum in DXY is struggling to advance further in the area just below the 98.00 mark so far this week, always amidst alternating headlines from the US-China trade front and the Brexit process. In the meantime, cautiousness is expected to remain in place today ahead of the FOMC meeting, where the Fed is seen reducing the FFTR once again in response to persistent signs that the US economy is running out of steam somewhat. On the broader view, the constructive outlook in DXY looks a bit damaged but it still is in play amidst a divided FOMC vs. a broad-based dovish stance from the rest of the G-10 central banks, the Dollar’s safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.01% at 97.69 and a breakout of 97.93 (high Oct.29) would open the door to 98.34 (55-day SMA) and finally 99.25 (high Oct.9). On the flip side, the next support lines up at 97.14 (monthly low Oct.18) seconded by 97.03 (monthly low Aug.9) and then 96.67 (low Jul.18).