Dollar Index: Buoyed by upbeat Fed, DXY teases inverse head-and-shoulders pattern

• The US dollar jumps 0.34% as Fed upgrades economic outlook. 
• The Fed sees faster decline in the jobless rate.
• The dollar index forms a bullish reversal pattern on the daily chart. 

The dollar index (DXY), which gauges the greenback’s strength against major currencies, is gaining altitude with the FX desks paring shorts on the not-so-dovish Federal Reserve (Fed) policy statement published Wednesday. 

While the Fed kept interest rates pinned near zero and reiterated tolerance for high inflation on Wednesday, it upgraded the economic outlook, putting a floor under the greenback. 

The bank said it anticipates faster U.S. economic recovery from the coronavirus crisis and foresees unemployment falling faster than the central bank expected in June.

As such, the dollar index found support near 92.78 following the Fed statement and has been rising ever since. At press time, the DXY is hovering near 93.50, representing a 0.34% gain on the day. 

The European desks may take cues from their Asian peers and offer the US dollar, powering more substantial gains in the DXY. 

The DXY’s daily chart shows an inverse head-and-shoulders pattern is being formed with the neckline resistance near 93.76. A close above that level would imply a bearish-to-bullish trend change and open the doors for 75.77 (target as per the measured move method). 

Daily chart