US Dollar Index rises sharply after FOMC

• US dollar appreciates after Fed’s decision to raise rates. 
• DXY erases losses and climbs back to 97.00.

The US Dollar Index rose from 96.70 back above 97.00 and turned positive for the day. The short-term technical outlook improved significantly with the recent rally. 

The move to the upside was triggered by a rally of the US dollar across the board following the Fed’s decision. It rose even further during Powell’s press conference. 

The Federal Reserve rose the key rate as expected to the 2.25%-2.50% range as expected. Forecasts were lowered signaling some uncertainty about future moves. Powell said that the policy does not currently need to be restrictive. He added that the Fed is not looking at changes to the inflation target.“Fed hikes as expected with a mixed message toward a slower pace of rate hikes. On net was not as dovish as the market had expected”, said analysts at TDS. 

The greenback is sharply higher compared to the level it had before the FOMC statement, particularly against commodity currencies. The DXY trades at 97.01, at the highest level of the day, holding a robust bullish intraday tone. 

DXY Short-term levels to watch 

If the greenback, rises further, resistance could be seen at 97.15, followed by 97.40 and 97.55 (Dec 11 high). To the downside, support levels might lie at 96.70 (Dec 18 low), 96.55 and 96.40.