US dollar index breaks below 94.00 post-Fed rate hike

• USD slide, as rate hike was widely expected.
• Focus on Powell’s speech for insights on the forward guidance.

The US dollar, when measured against a basket of six major currencies, witnessed a sharp knee-jerk dip below the 94 handle following the announcement of the rate hike decision by the US Federal Reserve (Fed).

As expected, the Fed announced a 25bps hike, lifting the Federal Funds Target Range to 2.00-2.25%, marking the third rate hike so far this year.

The greenback ran into offers, as a rate hike was already priced into markets. Also, the Fed removed the reference to accommodative removed, which widely read as dovish and added to the weight on the buck.

However, it remains to be seen if the spot holds the 93.80 support zone amid monetary policy divergence, as the Fed remains the only global central bank on a tightening monetary policy path.

All eyes now remain on the Fed President Jerome Powell’s speech at the post-policy press conference for further insights on the US interest rates outlook as well as for fresh dollar trades.

US dollar index Technical Levels

Higher Side Levels: 94.75 (20-DMA), 95.05 (50-DMA), 95.56 (Sept 10 high).

Lower Side Levels: 93.80 (key support), 93.19 (June lows), 92.59 (200-DMA).