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US Dollar Ranges Ahead of Key Central Bank Decisions

The US Dollar (USD) trades within a narrow range ahead of this week’s potential volatility catalysts, including the highly-anticipated policy decisions from the Bank of Japan (BoJ) and the US Federal Reserve (Fed).

Key Factors:

  • BoJ Decision: Expected end of the BoJ’s negative interest rate policy could impact markets, but the move has been heavily telegraphed.
  • Fed Outlook: Wednesday’s rate decision and subsequent speeches (including from Fed Chair Powell) will provide clarity on the US interest rate trajectory following recent hot inflation data.
  • Potential for Limited Impact: Both events could result in significant volatility but ultimately lead to a muted overall shift in the US Dollar’s position.

Technical Outlook:

  • DXY Rangebound: The US Dollar Index (DXY) faces pressure near the 55-day SMA (103.46) with further resistance at the 100/200-day SMAs (near 103.63/103.70). 104.96 remains a key upside target.
  • Downside Risks: If both central bank meetings prove anticlimactic, expect a renewed focus on Fed rate cut expectations, potentially driving the DXY towards 103.00 and 102.00 support levels. A break below could lead to a deeper decline towards 100.61 (2023 low).