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  • DXY stays offered in the mid-93.00s ahead of the FOMC event.
  • Advanced trade deficit came in at $70.64 billion in June.
  • The FOMC meeting and Powell’s press conference are next of note.

The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main rivals, remains under pressure in the area of 2-year lows around 93.50.

US Dollar Index focused on FOMC

Sellers have retaken control of the sentiment surrounding the dollar after Tuesday’s bullish attempt lacked follow through after briefly surpassing the 94.00 mark.

In the meantime, market chatter regarding extra monetary stimulus, the progress of the pandemic and the cautious stance expected from Chief Powell later on Wednesday are all keeping the demand for the buck subdued.

In the US data space, flash data showed June’s trade deficit is seen shrinking to $70.64 billion while Mortgage Applications by MBA contracted at a weekly 0.8%. Later in the session, June’s Pending Home Sales are due seconded by the EIA’s weekly report on crude oil supplies.

The main focus of attention will be on the FOMC event, with markets’ consensus seeing the Fed could strengthen its forward guidance as well as shed further details of any debate around yield curve control (YCC). The Fed Funds Target Range (FFTR) is expected to remain unchanged.

What to look for around USD

The dollar remains under heavy pressure as investors keep the bearish stance on the currency unchanged against the usual backdrop of US-China geopolitical jitters, the spread of the pandemic and efforts to return to a somewhat normal economic activity. Also weighing on the buck, market participants seem to have shifted their preference for other safe havens instead of the greenback on occasional bouts of risk aversion. On another front, the speculative community kept adding to the offered note around the dollar for yet another week, opening the door to a potential development of a more serious bearish trend in the dollar.

US Dollar Index relevant levels

At the moment, the index is losing 0.1424 at 93.50 and faces the next support at 93.40 (2020 low Jul.29) seconded by 93.19 (monthly low June 2018) and then 91.80 (monthly low May 18). On the upside, a break above 94.20 (38.2% Fibo of the 2017-2018 drop) would open the door to 96.03 (50% Fibo of the 2017-2018 drop) and finally 97.11 (55-day SMA).