US Dollar Index: DXY drops back towards sub-103.00 zone after Fed showdown, US Retail Sales eyed

• US Dollar Index fades bounce off the lowest level in a month, stays pressured after two-day downtrend.
• Fed’s hawkish halt, upbeat dot plot and economic projections fail to impress DXY bulls.
• Incoming US data appears more important as Powell’s Speech highlights “meeting by meeting” approach for rate decision.

US Dollar Index (DXY) takes offers to refresh its intraday low near 102.95 as it fails to defend late Wednesday’s corrective bounce off the lowest levels in a month during early Thursday in Asia. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s dovish bias for the US Federal Reserve (Fed) after it paused the rate hike trajectory.

The US Federal Open Market Committee (FOMC) kept the benchmark Fed rate unchanged at 5.0-5.25%, matching market expectations of pausing the multi-month-old hawkish cycle that propelled rates for 10 consecutive times.

Following the Interest Rate Decision, the FOMC unveiled hawkish signals via Economic Projections whereas Fed Chair Jerome Powell’s speech also appeared bullish about the US central bank.

It should be noted that the dot plot rose 30 bps from March for 2024 and 2025 to 4.6% and 3.4% respectively while the median rate forecasts suggest two more rate increases in 2023. Further, no rate cuts nor recession is expected in the current year whereas the median estimation for the US Gross Domestic Product (GDP) rose to 1.0% from 0.4% in March. Additionally, Powell’s speech unveils a “meeting by meeting” approach for decision-making but signals July as a ‘live’ meeting, suggesting a 0.25% rate hike.

Ahead of the Fed showdown, the US Producer Price Index (PPI) for May dropped to 1.1% YoY versus 1.5% expected and 2.6% prior.

Having witnessed the Fed-induced market moves, as well as the losses to the DXY, the US Dollar Index traders may pay attention to US Retail Sales for May and second-tier activity data for May and June respectively as the US central highlighted importance of each incoming data for decision-making.

Technical analysis

A daily closing below the 100-DMA, now immediate support around 103.05, keeps the US Dollar Index bears hopeful.