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8 May 2025,23:42

Daily Market Analysis

Dollar Steadies After Fed Pause; Powell Flags Trade Uncertainty

8 May 2025, 23:42

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Key Takeaways:

*Fed holds rates unchanged at 4.25% – 4.50%, citing rising uncertainty from tariffs and trade policy.

*Powell’s cautious tone underscores a data-dependent path forward, dampening market volatility.

*Dollar Index rebounds, but technical indicators warn of potential correction ahead.

Fed Keeps Rates on Hold, Highlights Uncertainty

The overall market sentiment during yesterday’s session and early Asian trading hours was largely shaped by the Federal Reserve’s latest monetary policy decision. As widely expected, the Federal Open Market Committee (FOMC) voted unanimously to keep the benchmark federal funds rate unchanged at 4.25%–4.50%.

However, what caught investor attention was Fed Chair Jerome Powell’s cautious tone. He reiterated that while the U.S. economy remains resilient, escalating trade tensions and tariffs are injecting uncertainty into the outlook for inflation and employment. Powell emphasized that the Fed is in no rush to adjust interest rates, preferring to await clearer signals from incoming data before shifting policy direction.


Market Reaction Remains Muted

Given that a rate hold was already priced in, global market reaction was subdued. The Nasdaq index edged up modestly, gaining 0.27% to close around 17,738.16, as investors digested Powell’s comments with a wait-and-see attitude.

On the FX front, the U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, rebounded slightly in response to the Fed’s decision. Meanwhile, gold prices retreated, weighed down by dollar strength and reduced demand for safe-haven assets in the absence of a dovish Fed surprise.

📈 Dollar Index Technical Outlook

DOLLAR_INDX, H4

From a technical perspective, the Dollar Index (DXY) is currently trading higher after rebounding from its moving average (MA) support line. However, the index is now testing a consolidation resistance level at 100.05, a key area to watch for potential breakout confirmation.

  • Indicators flash caution: Both the MACD and RSI are signaling overbought conditions, suggesting that upside momentum could be capped in the near term.
  • Breakout or pullback?: If the DXY fails to break above the 100.05 resistance, a technical correction may follow, with potential retracement toward the yellow MA line as the next support.
  • Trading tip: Traders should monitor for a confirmed breakout or rejection at resistance before entering directional trades.

Resistance level: 100.05, 102.65

Support level: 99.20, 98.50

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