US Dollar secures gains as eyes flick to Fed decision and its messaging

• The two-day FOMC meeting kicks off on Tuesday with a hold priced in for Wednesday’s interest rate decision.
• US consumer sentiment declined in April, while Q1 Employment Cost Index increased.
• Hawkish bets on the Fed continue to favor the USD.

The US Dollar Index (DXY) is presently trading higher at 105.95,  while the two-day Federal Reserve (Fed) meeting kicked off. Markets are expecting a hawkish hold by the central bank, but messaging by Jerome Powell will be key. On Tuesday, positive mid-tier data is acting as a tailwind for the Greenback.

The US economy is witnessing resilience and persistent inflation, which makes a case for a hawkish hold by the Federal Open Market Committee (FOMC), which will likely show their lack of confidence in the progress being made. 

Daily digest market movers: DXY rises as markets gear up for Fed decision, mid-tier data supports Greenback

• Conference Board’s Consumer Confidence Index in the US dropped in April to the lowest level since July 2022, at 97.0, falling from March’s figure of 103.1. 
• Elsewhere, the Employment Cost Index in the US rose by 1.2% YoY in the first quarter.
• Market expectations show a 10% chance of a rate cut in June by the Fed, with odds decreasing to 33% for July, and remaining below 75% for September. 
• For Wednesday, there are growing expectations for a hawkish surprise due to key Fed officials advocating for patience before initiating easing measures.

DXY technical analysis: DXY recovers as bulls make a stride, bears around the corner

The technical outlook of DXY indicates predominantly bullish momentum. The Relative Strength Index (RSI) presents a positive slope in positive territory, indicating the dominance of the buying side. The flat green bars viewed in the Moving Average Convergence Divergence (MACD) align closely with this bullish sentiment but warn of flattening momentum.

That being said, the index remains above its 20, 100, and 200-day Simple Moving Averages (SMAs). This points consistently toward a dominating bullish backdrop. Hence, even as short-term challenges are dense, the larger trend appears to lean in favor of bulls.