The US dollar’s rally has stalled ahead of the Oct. 31-Nov.1 FOMC meeting. Could the Fed be a catalyst for a correction in the USD? What are technicals saying?
US Fed chair Powell, while acknowledging the tightening in financial conditions recently, left the door open for higher rates. For more details, see “,” published October 20. Furthermore, solid US economic data and the perception of higher for longer rates have triggered a pushback in rate cuts in 2025.
Having said that, for the recent consolidation to turn out into a reversal, US exceptionalism – the outperformance of the US economy relative to the rest of the world and a broadly hawkish Fed -- would need to reverse.Until then, it could be premature to conclude that the USD has peaked.On price charts, the US dollar index’s rally appears to be stretched. Market diversity, as measured by fractal dimensions, appears to be low as the DXY Index hit a multi-month high earlier this month.
For the DXY Index, recently the 65-day fractal dimension fell below the threshold of 1.25, flashing a red flag, pointing to a consolidation/minor retreat at the very least. For more discussion, see “Having said that, until there is a price confirmation, the path of least resistance remains sideways to up in the interim. For the immediate upward pressure to ease, the index would need to fall below support at the mid-October low of 105.50.
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