• On Wednesday, DXY is trading at a neutral rate near 107.00.
• The market focused on the upcoming Fed scatter charts and interest rate forecasts for 2025.
• A 25 bp cut is already priced in.

The U.S. Dollar Index, which measures the value of the U.S. dollar against a basket of currencies, is trading neutral near 107.00 on Wednesday as it consolidates ahead of the Federal Reserve’s (Fed) interest rate decision. Traders are eagerly awaiting a scatter chart to gauge the number of rate cuts expected in 2025. Despite recent dollar weakness following Friday’s profit-taking and recent macroeconomic data from China, the dollar remains steady as it seeks direction as Fed policy announcements is approaching.

Daily market recap: The US dollar remains unchanged and the Fed decision takes center stage

• The U.S. dollar remains unchanged as markets await the Federal Reserve’s interest rate decision, focusing on potential changes in the “dots” that forecast future interest rates.
• Changing economic conditions are causing inflation as measured by the Consumer Price Index (CPI) to rise from 2.4% in September to 2.8% in November, while economic growth remains solid and labor markets stable.
• Markets expect a 25 basis point cut in interest rates with forecasts of three cuts in 2025, which is seen as a neutral outcome. A hawkish surprise with fewer cuts may weaken risk sentiment, although a complete pause in cuts is unlikely.
• Updated macro forecasts and scatter charts are likely to become hawkish on the back of stronger growth and persistent inflation, resulting in fewer projected cuts.

DXY Technical Outlook: Good indicators, but gains circumscribed below resistance

The indicators rebounded significantly last week, but seem insufficient to push the index beyond the 107.00-108.00 area. At the beginning of the week, the Index retreated slightly, signaling fatigue with the dynamics.

Still, the bigger picture remains constructive if DXY can hold above its 20-day elementary moving average. While investors await Fed guidance, technical signals suggest a cautious but potentially supportive environment for the US dollar unless there are hawkish surprises that could lead to a breakout.