US Dollar retreats ahead of Fed policy decisions

• The US Dollar weakens against its major rivals on Wednesday.
• The US Dollar Index declined toward 101.00 after closing in the red on Tuesday.
• US Federal Reserve will announce the interest-rate decision and publish the policy statement.

The US Dollar struggles to stay resilient on Wednesday as investors move to the sidelines ahead of the US Federal Reserve's (Fed) highly-anticipated monetary policy decisions. The USD index – which tracks the USD's valuation against a basket of six major currencies – edges lower toward 101.00 after snapping a five-day winning streak on Tuesday. 

The Fed is widely anticipated to lift the policy rate by 25 basis points (bps) to the range of 5.25%-5.5%. The policy statement and Chairman Jerome Powell's comments will be scrutinized by investors, who try to figure out whether the US central bank will raise rates again later in the year despite growing signs of easing price pressures.

Daily digest market movers: US Dollar eyes Fed decision

• Previewing the Fed event, "I want to stress that a 25 bps hike is fully priced in, and will not have an impact on markets," said FXStreet Analyst Yohay Elam. "Investors are laser-focused on hints about the next moves. The Fed does not publish new forecasts at this meeting, letting the statement talk first. Then, Fed Chair Powell will take the stage, answering questions and triggering the lion's share of volatility."
• According to the CME Group FedWatch Tool, a 25-basis-point Fed rate hike on Wednesday is fully priced in. The probability of the Fed hiking the policy rate one more time before the end of the year stands slightly above 30%.
• Consumer sentiment in the US continued to improve in July, with the Conference Board's Consumer Confidence Index rising to 117.0 from 110.1 (revised from 109.7) in June.
• Further details of the publication showed that the Present Situation Index climbed to 160.0 from 155.3 and the Consumer Expectations Index advanced to 88.3 from 80. 
• House prices in the US rose by 0.7% on a monthly basis in May, the monthly data published by the US Federal Housing Finance Agency showed on Tuesday. This reading followed the 0.7% increase recorded in April and came in better than the market expectation of a 0.2% rise.
• Wall Street's main indexes closed in the positive territory on Tuesday. The technology-heavy Nasdaq Composite gained nearly 1% following the bearish start to the week.
• The benchmark 10-year US Treasury bond yield holds steady at around 3.9% early Wednesday. 
• US S&P Global Manufacturing PMI improved to 49.0 in July's flash estimate from 46.3 in June. Services PMI edged lower to 52.4 from 54.4 in the same period. Finally, Composite PMI declined to 52.0 from 53.2, pointing to an ongoing expansion in the private sector's business activity, albeit at a softening pace.
• Commenting on PMI surveys' findings, "July is seeing an unwelcome combination of slower economic growth, weaker job creation, gloomier business confidence and sticky inflation," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. "The overall rate of output growth, measured across manufacturing and services, is consistent with GDP expanding at an annualized quarterly rate of approximately 1.5% at the start of the third quarter," he added.
• Assessing the USD's short-term outlook, "positioning data suggests investors are running reasonably large short Dollar positions into this week's Fed, ECB and BoJ policy meetings," noted economists at ING. "We do like a weaker USD later this year, but the Dollar's recent corrective rally might endure this week if the Fed hangs onto its tightening bias."

Technical analysis: US Dollar Index loses recovery momentum

The US Dollar Index (DXY) touched the 20-day Simple Moving Average (SMA) on Tuesday but closed the day below that level. Additionally, the Relative Strength Index (RSI) edged lower toward 40 after failing to stabilize near 50, reflecting buyers' hesitancy.

On the downside, DXY faces immediate support at 101.00 (former resistance, static level) before 100.50 (static level) and 100.00 (psychological level, static level).

Looking north, a daily close above 101.50 (20-day SMA) attract bulls and opens the door for a leg higher toward 102.00 (static level, former support) and 102.50-102.60 (50-day SMA, 100-day SMA).