The past five sessions have been no fun for USD bulls. Values of the Greenback have consistently fallen vs the majors and the USD Index is taking heavy damage. Since the breakout rally to new yearly highs on 7 March, it has been mostly downhill.

At least in the short-term, this bearish trend may continue. Next Wednesday marks the second FED Monetary Policy Statement of 2019. The markets are expecting the FED to stand pat; the CME’s FEDWatch Index is currently assigning a 98.7% chance of interest rates being held at current levels.

June USD Index Futures Are Lagging Badly

So, are things going to get worse for the USD Index? It is a distinct possibility. In the event that values do not hold above 95.500 before Wednesday’s FED statement, we may be looking at a sub-95.000 correction.

Overview: For the time being, it is best to approach the March USD Index with caution. The tone from the FED is more than likely going to be dovish and emphasize the need for “patience” and “flexibility” in rate tightening. While this may preserve economic growth and equities valuations, it won’t do much for the Greenback.

In addition to the FED, the FOMC is due to release its official Economic Projections Report. It will cover their inflation and growth expectations for the next two years. Most analysts expect the FOMC to limit upside expectations on both growth and inflation. Once again, this may be favorable for equities valuations. However, the USD may fall further if the report suggests that long-term dovish FED policy is probable.