US Dollar Index (DXY) Breakout

Based on the latest Federal Reserve's decision to maintain interest rates and not cut rates in March, it's clear that the market is currently leaning towards a more bullish stance on the US Dollar in a complex economic landscape.

The Federal Reserve's decision to hold interest rates steady at 5.5% aligns with the data, reflecting a cautious stance towards economic management. The Fed seems committed to ensuring that inflation moves sustainably toward their 2% target before considering rate adjustments. This indicates a careful balancing act between promoting economic growth and controlling inflation.

The labor market's continued strength, marked by significant job growth and low unemployment, suggests economic momentum despite aggressive rate hikes over the past couple of years. However, persistent inflation in sectors like housing and insurance could slow down the overall decline in inflation rates.

In the technical analysis of the U.S. Dollar Index (DXY), the recent trading within a channel points to a consolidation phase following an uptrend. The support at the 103.00 level is crucial, as it's where significant buying interest has been preventing further declines. Currently, the DXY is approaching a major resistance around 104.40, after breaking the 104.40 resistance level that it has struggled with for 3 trading weeks. If it breaks and closes above this level, it would be a bullish signal for the dollar.

The upcoming ISM Services PMI data is expected to come in higher than last month and it could be a significant market mover. Given the current holding pattern in the DXY, we may see a continuation to the upside or maybe a pullback and retest before we continue.

We are watching for the reaction to the ISM Services PMI data, while still holding our buy positions and waiting for some setup on a retracement for new long positions. As long as the DXY doesn't break back into the channel, we are bullish on the dollar.