US dollar index extends the rebound to test 94.40 on Powell’s speech

• USD recovery extends, as markets digest Powell’s comments.
• Look to break through the recent 60-pips trading range post-FOMC.

Following a negative initial reaction to the Fed’s monetary policy statement, the US dollar, when measured against a basket of six major currencies, recovered ground and swung back above the 94 handle, in a bid to test the 94.40 upside barrier.

The US dollar is seen trying hard to take on the recovery beyond the 94 level, as markets digest the comments delivered by the Fed President Powell, as his post-monetary policy press conference is now underway.

Key Highlights from Powell’s speech:

Gradual return to normal interest rates helping to sustain US economy.

Confident US financial system is stronger today.

Overall us growth outlook remains favorable, boosted by fiscal stimulus.

Fed expects inflation to remain near 2% on a sustained basis.

As expected, the Fed announced a 25bps hike, lifting the Federal Funds Target Range to 2.00-2.25%, marking the third rate hike so far this year. The Fed removed the reference to accommodative monetary policy stance, which made markets to believe that the Fed is close to neutral policy.

US dollar index Technical Levels

Higher Side Levels: 94.75 (20-DMA), 95.05 (50-DMA), 95.56 (Sept 10 high).

Lower Side Levels: 93.80 (key support), 93.19 (June lows), 92.59 (200-DMA).