The Fed will release the minutes of the January policy meeting at 19:00 GMT on Wednesday. The USD Index (DXY), which tracks the USD’s valuation against a basket of six major currencies, rose more than 2% in January and it’s up 0.65% so far in February.
The market positioning suggests that the USD has more room on the upside if FOMC Minutes feed into expectations for a delay in the policy pivot until June. On the other hand, the USD could come under renewed selling pressure if the publication shows that policymakers are willing to consider a rate reduction by May. However, policymakers’ comments in the minutes are likely to be outdated due to the fact that the meeting took place before the latest inflation and employment data releases. Hence, the market reaction could remain short-lived.
Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief technical outlook for the USD Index:
“The 100-day Simple Moving Average and the Fibonacci 50% retracement of the October-December downtrend form a pivot area at 104.00-104.10. If DXY fails to stabilize above this region, 103.70 (200-day SMA) aligns as the next important support before 103.25 (Fibonacci 38.2% retracement). Looking north, 104.75 (Fibonacci 61.8% retracement) and 105.00 (psychological level, static level) could be set as the next bullish targets in case 104.00-104.10 holds as support.”
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