US Dollar deflates further sub-97.00 ahead of FOMC

The greenback, in terms of the US Dollar Index, is extending its weekly correction lower and is now moving further south of the 97.00 key support.

US Dollar all the attention on FOMC

The index is losing further momentum on Wednesday, retreating for the third session in a row and staying in near term corrective mode after being rejectred from Friday’s tops in the mid-97.00s.

The down move in USD is also sustained by the retracement of the yields of the US 10-year reference, shedding around 2 bp since nearly 2.23% on Tuesday to the current area around 2.205%.

USD is poised to be the main actor in today’s session in light of the release of May’s inflation figures gauged by the CPI and retail sales, all ahead of the FOMC gathering scheduled for the European evening.

It is worth mentioning that the probability of a rate hike today is nearly 100% according to CME Group’s FedWatch tool. However, investors will close follow the statement, where the reduction of the Fed’s balance sheet and the prospects of another rate hike in H2 should take centre stage. Currently, a rate hike in December is seen at 40%.

US Dollar relevant levels

The index is losing 0.08% at 96.89 and a break below 96.45 (2017 low Jun.7) would target 95.91 (low Nov.9 2016) and then 94.95 (low Sep.22 2016). On the other hand, the next up barrier is located at 97.47 (high Jun.9) seconded by 97.70 (high May 30) and finally 98.11 (50% Fibo of the May-June drop).