just now
- The Fed’s hawkish hold and cautious tone supported a strong rebound in the U.S. dollar across majors.
- Dollar (DXY) reclaimed key Fair Value Gaps and broke prior highs, confirming bullish technical momentum.
- Unless data surprises, the path of least resistance remains higher for the dollar, pressuring foreign pairs EUR, GBP, AUD, and Gold.
Dollar Strength Gains Traction
The U.S. Dollar Index (DXY) extended its rebound this week, building on momentum that began after last week's softer inflation data and the Fed's steady tone. While the Federal Reserve left interest rates unchanged as widely expected the market reaction was far from neutral.
Despite dovish undercurrents in the CPI and PPI prints, the Fed’s dot plot hinted at a more cautious approach to cutting rates, with Chair Powell emphasising the need for “greater confidence” in disinflation before pivoting. This firm stance has supported a modest dollar bid across the majors.
Why the Fed Is Still Hawkish:
- The Fed held rates steady, but only projects one rate cut in 2025 (down from 2-3 earlier this year).
- Powell emphasised the need for “greater confidence” in disinflation before easing.
- Services inflation remains sticky, and the Fed is wary of cutting too soon.
- The dot plot and tone show they’re not rushing to ease, especially with the labor market still resilient.
But Not Aggressively Hawkish Either:
- Inflation is cooling (as seen in CPI and PPI).
- Powell acknowledged progress toward the inflation goal.
- Market expectations are still pricing a potential cut by September, although not guaranteed.
Conclusion:
The Fed is in a "hawkish hold" mode:
- They’re not raising rates, but also not ready to cut quickly.
- The stance is data-dependent - leaning hawkish until inflation clearly aligns with their 2% target.
Bullish Scenario on Point
Previously, I have outlined in my latest analysis, Dollar Struggles Near Three-Year Lows Ahead of FOMC: What It Means for the Majors, the bullish and bearish scenario that could set dollar’s trajectory post-Fed rate policy decision.
Either we push to the upside with a hawkish stance:
Or push down lower with a dovish stance + resistance level coupled with the Daily FVG:
Technical Breakdown: Daily FVG Reclaimed
The bullish scenario is now in motion, with price making a clean break above the reclaimed 4-Hour FVG and pushing past the prior highs.
- Fair Value Gap (FVG) Retest & Breakout
- Price reclaimed and respected the new 4-hour bullish FVG (highlighted in green), nested inside the Daily FVG that acted as support after being invalidated.
What This Means for the Dollar
The dollar is showing strength in alignment with fundamental backing (hawkish Fed hold).
Bullish Case: Target at 99.392 Could Push Dollar Recovery
- 4-Hour FVG resting between 98.536 - 98.745 holds
- Last line of defense before risk increases is 98.50 level
Bearish Case: Breakdown Below Fed Candle Could Pull Dollar Deeper
- Breakdown below this range 98.536 - 98.745
- Break below the hawkish candle
- 98 level breakdown
The path of least resistance is still up for the dollar, and most majors are aligned for USD continuation trades, unless upcoming data shifts the tone.
With the dollar gaining traction:
- Look for trades in favor for USD.
- Lessen risk on trading in favor of foreign pairs unless USD pulls back.
Check Out My Contents:
Strategies That You Can Use:
How To Trade & Scalp Indices at the Open Using Smart Money Concepts (SMC)
How to Trade Breakouts Effectively in Day Trading with Smart Money Concepts
Complete Step-by-Step Guide to Day Trading Gold (XAU/USD) with Smart Money Concepts (SMC)
The Power of Multi-Timeframe Analysis in Smart Money Concepts (SMC)
Forex Trading Strategy for Beginners
The Ultimate Guide to Understanding Market Trends and Price Action
Mastering Candlestick Pattern Analysis with the SMC Strategy for Day Trading
How To Trade News:
Why Smart Money Concepts Work in News-Driven Markets - CPI, NFP, and More
How to Trade NFP Using Smart Money Concepts (SMC)-A Proven Strategy for Forex Traders
How to Trade CPI Like Smart Money - A Step-by-Step Guide Using SMC
Learn How to Trade US Indices:
How to Start Trading Indices and Get into the Stock Market with Low Capital (2025 Guide)
Best Indices to Trade for Day Traders | NASDAQ, S&P 500, DAX + Best Times to Trade Them
How To Trade & Scalp Indices at the Open Using Smart Money Concepts (SMC)
NAS100 - How to Trade the Nasdaq Like a Pro (Smart Money Edition)
How to Trade CPI Like Smart Money - A Step-by-Step Guide Using SMC
Why Smart Money Concepts Work in News-Driven Markets - CPI, NFP, and More
How to Start Trading Gold:
How to Swing Trade Gold (XAU/USD) Using Smart Money Concepts: A Simple Guide for Traders
Complete Step-by-Step Guide to Day Trading Gold (XAU/USD) with Smart Money Concepts (SMC)
The Ultimate Guide to Backtesting and Trading Gold (XAU/USD) Using Smart Money Concepts (SMC)
Why Gold Remains the Ultimate Security in a Shifting World
How to Start Day Trading:
5 Steps to Start Day Trading: A Strategic Guide for Beginners
8 Steps How to Start Forex Day Trading in 2025: A Beginner’s Step-by-Step Guide
3 Steps to Build a Trading Routine for Consistency and Discipline - Day Trading Edition
Learn how to navigate yourself in times of turmoil:
How to Identify Risk-On and Risk-Off Market Sentiment: A Complete Trader’s Guide
How to Trade Risk-On and Risk-Off Sentiment - With Technical Confirmation
The Ultimate Guide to Understanding Market Trends and Price Action
Want to learn how to trade like the Smart Money?
Mastering the Market with Smart Money Concepts: 5 Strategic Approaches
Mastering Candlestick Pattern Analysis with the SMC Strategy for Day Trading
Understanding Liquidity Sweep: How Smart Money Trades Liquidity Zones in Forex, Gold, US Indices
The SMC Playbook Series Part 4: How to Confirm Trend Reversal & Direction using SMC
The SMC Playbook Series Part 5: The Power of Multi-Timeframe Analysis in Smart Money Concepts (SMC)
Fair Value Gaps Explained: How Smart Money Leaves Footprints in the Market
Trading Psychology and Continuous Improvement Contents:
The Mental Game of Execution - Debunking the Common Trading Psychology
5 Steps to Backtest a Trading Strategy with AI: A Step-by-Step Guide
Managing Trading Losses: Why You Can Be Wrong and Still Win Big in Trading
The Hidden Threat in Trading: How Performance Anxiety Sabotages Your Edge
Why You Fail in Trading: You Don’t Have Enough Capital to Survive
Why 90% of Retail Traders Fail Even with Profitable Trading Strategies
Follow me for more daily market insights!
Jasper Osita - LinkedIn - FXStreet - YouTube
This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.
