US Dollar: Hawkish Powell This Week Could Spark Rally Toward 107

investing.com:

The US dollar mostly moved sideways but took a bullish turn towards the end of the previous week. Inflation data sparked volatility in the dollar index as CPI and PPI both came in above expectations, fueling inflation fears.

Following the data, expectations regarding the Federal Reserve's policy began to shift. Market discussions suggested that the Fed might cut interest rates twice this year instead of thrice, leading to a boost in the greenback.

Consequently, the Fed's decision after the meeting holds significant importance as it will provide clues about the central bank's future actions.

The Fed is expected to keep interest rates unchanged this month, with a potential rate cut looming in June depending on inflation trends.

The statements following the FOMC meeting this week will be crucial for investors, who are anticipating a 72 basis point rate cut for the year.

There's a 58% chance of interest rates decreasing in June, contrasting with the Fed's earlier projection of 3 rate cuts and a 75 basis point reduction for the year.

Currently, data-driven analysis supports the expectation of a change in forecasts, sustaining demand for the dollar. After bouncing back from support around 102.8 last week, the DXY returned to the 103 region.

Technically, the DXY is testing the short-term trend line at 103.5 today, with a potential breakout targeting 103.95 as the first resistance point. The Stochastic RSI on the daily chart suggests a bullish momentum.

Maintaining levels above 103.6 is crucial amidst potential volatility this week for the upward movement to continue. A hawkish approach from the Fed on Wednesday could strengthen the dollar, potentially propelling the DXY towards the 107 region.

Conversely, a dovish stance from