Bullish Sentiment Could Return if Buyers Defend This Support

Forex

Central Bank

Summary:

If the market interprets the Fed’s lack of clarity on rate cuts as a bullish signal for the dollar, this zone could serve as a base for an upward move.

BUY USDX

Close Time

CLOSED

103.080

Entry Price

106.260

101.800

98.900 -0.050 -0.05%

52.0

Pips

Profit

101.800

103.600

Exit Price

103.080

Entry Price

106.260

According to the Federal Reserve, growth expectations for 2025 have been significantly undermined by the Trump administration’s erratic approach to trade tariffs, which has involved sudden announcements and subsequent reversals via social media. As a result, the Federal Open Market Committee (FOMC) has revised its GDP forecast for the end of 2025 down to just 1.7%, a notable drop from the 2.1% projection released in December.

The Fed’s latest dot plot indicates that interest rates are expected to remain steady at 3.9% by the end of 2025, largely unchanged from the previous policy meeting. Additionally, the FOMC has decided to slow the pace of its balance sheet reduction starting in April.

Despite this, interest rate futures still price in a strong likelihood of a quarter-point rate cut in June, with market bets climbing above 60% after Fed Chair Jerome Powell acknowledged that slowing economic growth and labor market conditions will be a key focus for policymakers.

However, not all developments favor a dovish outlook. Powell cautioned that the volatility of U.S. tariff policies could lead to renewed inflationary pressures, posing a significant risk to the Fed’s long-term strategy.

The central bank’s quarterly summary of economic projections reveals a divided outlook among Fed officials. Nine out of 19 policymakers expect rates to be within the 3.75% to 4.00% range by year-end. Meanwhile, four anticipate only one rate cut, while another four see no need for reductions at all. Two policymakers, on the other hand, project three rate cuts before the year concludes. Looking further ahead, the median forecast suggests an additional 50 basis points of easing by the end of 2026, bringing the policy rate down to 3.4%.

Meanwhile, recent U.S. economic data continues to shape market sentiment. Industrial production surged by 0.9% last month, following an upwardly revised 0.1% increase in January, according to the Fed’s latest report. This reading exceeded economists’ forecasts, which had predicted a modest 0.3% recovery after the previous -0.1% decline.

On an annual basis, factory output climbed 0.7% in February, pointing to a gradual stabilization in the manufacturing sector, which accounts for 10.3% of the U.S. economy. The sector has shown resilience since the Fed initiated its rate-cutting cycle in September. Bullish Sentiment Could Return if Buyers Defend This Support_1

Bullish Sentiment Could Return if Buyers Defend This Support_1

Technical Analysis

The U.S. Dollar Index (DXY) has reached a local low of 102.80, a critical support level that has triggered bullish reactions on two previous occasions. If the market interprets the Fed’s lack of clarity on rate cuts as a bullish signal for the dollar, this zone could serve as a base for an upward move. Additionally, the RSI on the daily chart has dropped to 30, indicating oversold conditions, which could attract long-term dollar buyers.

The 100-period and 200-period moving averages are positioned at 106.58 and 104.75, respectively. Notably, the 100-period moving average aligns with the next major resistance zone.

Today’s daily candle closed with a bullish bias, suggesting a possible continuation of upward momentum. If the DXY successfully defends its current support and buyers step in, a rally toward the 106.26 region could materialize. Conversely, a decisive breakdown below 102.10 could open the door for a deeper decline toward last year’s low of 99.80.

Trading Recommendations

Trading direction: Buy

Entry price: 103.100

Target price: 106.260

Stop loss: 101.80

Validity: Mar 28, 2025 15:00:00

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Bullish Sentiment Could Return if Buyers Defend This Support

Technical Analysis

Risk Disclosure