US Dollar Rate Extends Losses as Fed Signals Dovish Outlook

US Dollar Rate Extends Losses as Fed Signals Dovish Outlook
The US Dollar rate experienced further declines, dropping to 102.90 against the DXY Index. This movement was heavily influenced by the Federal Reserve’s latest monetary policy decision. As anticipated, the Fed kept interest rates within the 5.25-5.50% range. However, the major impact came from the central bank’s projection of a 75 basis point easing, exceeding prior forecasts. This development has significant implications for those looking to sell dollars or engage in dollar exchange activities.

Market Reacts to Fed’s Dovish Stance

Market movements reflect a weakened US Dollar following the Federal Reserve’s decision. Amid cooling inflation and a robust labour market, the market is projecting three rate cuts in 2024. At the same time, the Fed stopped short of a full declaration of victory over inflation; its alignment with market expectations triggered risk-on sentiments and a depreciation in the dollar exchange rate.

Technical Analysis of the US Dollar Rate

Technical indicators, including RSI and MACD on the daily chart, signal a bearish outlook for the DXY Index. The US Dollar rate falling below key SMAs reinforces the control of sellers, suggesting a challenging period ahead for those holding US dollars or considering when to sell dollars.

EUR/USD Surges as US Dollar Weakens

The EUR/USD pair saw a notable rally from 1.0785 to approximately 1.0850 following the Fed’s decision to maintain interest rates. This broader weakening of the US Dollar was fueled by a sharp decline in US Treasury yields, creating favourable conditions for the euro and affecting the dollar exchange market.

EUR/USD Levels to Watch and ECB Announcement

Should the upward momentum continue, the EUR/USD pair might test the 20-day SMA at 1.0870, potentially strengthening the euro’s position against the dollar. Immediate support lies at 1.0810, followed by 1.0770. In the meantime, the European Central Bank (ECB) is expected to maintain its policy at its last meeting of the year, with updates that could influence the US Dollar rate.

The US Dollar rate faced notable declines against both the euro and yen after the Federal Reserve signalled an end to interest rate hikes, hinting at lower borrowing costs in 2024. This development is particularly important for investors and traders in the dollar exchange market and those looking to sell dollars.