Good morning everyone.
The dollar index has broken below the trend line support around the 100 level on Monday, and since then the market has been moving lower. So most likely price is moving sideways ahead of the Fed rate decision today. As you know, some may still expect a more hawkish tone due to inflation risks linked to higher energy prices from the Middle East situation, while others are looking for cuts after the latest weak labor data. This could keep the dollar in a neutral phase in the near term as they may decide to stay on hold.
What is important is that we now have a clear five wave decline from the recent highs, which is usually a key signal of at least a temporary change in trend. Ideally, we are now tracking a higher degree A-B-C correction that could push price even lower, possibly back toward the midpoint of the previous fourth wave around 99.07, followed by deeper support at 98.48. So after some short term rallies, the dollar may stay in a neutral phase until this three wave correction is completed.
If you are looking for opportunities or positioning into the second half of the week, it makes sense to wait for the Fed first, then act once the dust settles and we get a clearer message from Powell about the next steps.
Grega
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