Dollar Index (DXY) outlook following the Fed decision

The US Dollar Index (DXY) fell sharply to point A yesterday later than the FOMC announced a 0.25% rate cut and Jerome Powell held a press conference.

The rate reduction has made the dollar less appealing as a store of value or for yield, while the indication that the Fed may pause before further cuts offers some support. As a result, the current level reflects the market’s attempt to find a fair valuation for the US currency.

Technical perspective

A few days ago, we highlighted:

• the presence of two overlapping trend channels;
• signs of tradeing pressure dominating the market;
• the emergence of a consolidation zone.
  

Yesterday’s price action added clarity to the picture:

• the consolidation zone (marked in black) was breached later than the median of the red channel acted as resistance (arrowed on the chart);
• the index fell to the lower boundary of the red channel;
• the previous support near 98.78 now acted as resistance (second arrow);
• the RSI is approaching oversold levels, indicating continued bearish pressure.

Taken together, these signals suggest a potential continuation of the downward slide along the lower boundary of the red channel. If this momentum persists, the DXY could test the lower boundary of the blue channel, which may serve as a significant support level.

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