Dollar index consolidates above 90.00, eyes Fed meeting

• USD strengthens vs risk currencies on Fed fears. 
• Safe havens rise against USD on risk aversion. 
• USD index flatlined, focus on Fed's wording. 

Having rallied for four consecutive weeks, the dollar index (DXY) is trading in a sideways manner around 90.30 in Asia. 

The greenback is reporting moderate gains against the EUR, GBP and commodity dollars on growing fears that the Federal Reserve would be more aggressive with interest rate hikes. Meanwhile, trade war fears and the resulting risk-off tone in stocks is helping safe havens like Yen score gains against the USD. 

Focus on Fed's wording

Investors will be paying close attention to the wording of the Fed statement for clues on whether Powell and Co. believes more hikes are needed on the back of expansionary fiscal policy. The treasury yields and the DXY will likely surge, sending stocks lower if the Fed takes note of the inflationary impact of the US protectionist policies. Analysts at Danske Bank do not expect big changes to the Fed statement and expect the central bank signal it is time actually to hit the brakes by raising the Fed funds rate above the longer-run dot of 2.75%. 

Dollar Index Technical Levels

Reuters report details the technical set up as follows - 

• "Clear break of recent highs at 90.36/38 targets pivotal 90.93/91.01." 

• "Initial support found at 10 and 21 DMA at 89.95/96"

• "If Fed dot plots indicate 4 rate hikes in 2018, 91.00 to be tested"