USD Index treads water around 105.20 ahead of FOMC

• The index trades within a tight range just above 105.00.
• The FOMC meeting will take centre stage later in the session.
• The Fed is expected to keep rates unchanged on Wednesday.

The greenback attempts some consolidative move in the low 105.00s when measured by the USD Index (DXY) ahead of the opening bell in Euroland on Wednesday.

USD Index focused on the FOMC meeting

The index extends the side-lined trade above the 105.00 hurdle amidst scarce volatility and the usual pre-FOMC lull midweek.

That said, further range bound remains well on the cards in the next hours ahead of the key FOMC event due in the European evening.

Regarding the latter point, investors generally agree that the Federal Reserve will maintain its current interest rate. However, the focus is expected to shift to the central bank's forward guidance during Powell's press conference.

In the US data space, usual weekly Mortgage Applications tracked by MBA are also due later in the session.

What to look for around USD

The 105.00 zone so far emerges as a decent contention area for occasional bearish attempts in the index.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: MBA Mortgage Applications, Fed interest rate decision, Fed Press Conference (Wednesday) - Initial Jobless Claims, Philly Fed Index, CB Leading Index,  Existing Home Sales (Thursday) – Flash Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is down 0.06% at 105.13 and the breach of 104.42 (weekly low September 11) would open the door to 103.03 (200-day SMA) and then 102.93 (weekly low August 30). On the flip side, the next up barrier aligns at 105.43 (monthly high September 14) seconded by 105.88 (2023 high March 8) and finally 106.00 (round level).