DXY inter-markets: correction remains intact

The US Dollar Index (DXY) – which tracks the buck vs. its main competitors – has dipped to fresh 3-month lows around 99.20 earlier in the European morning, as market participants were adjusting to yesterday’s FOMC meeting.

Nothing new from the Committee at the meeting on Wednesday, leaving the target rate intact while the uncertainty around ‘Trumponomics’ still poised to weigh on sentiment. At the same time there was no modification of the current rate path, leaving the projected three rate hikes for the current month unchanged.

Anyway, the bearishness around the buck has intensified today to new YTD lows, opening the door for a deeper correction in the near term and thus trimming further the November-January rally.

Additionally, yields in the US money markets have retreated from 2017 tops seen earlier in January, removing some tailwinds from the USD’s upside.

In the longer run, however, the outlook for USD stays constructive while above the 9-month support line around 97.20. This support area appears reinforced by the critical 200-day sma at 97.40.