US Dollar stays quiet around 93.80 ahead of Wednesday's FOMC meeting

After starting the week with a bearish gap and refreshing its lowest level in more than 13 months, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, was able to retrace its losses on Monday. However, the index failed to gather enough momentum to challenge the 94 mark and is now at 93.80, virtually flat on the day.

Today's price action doesn't suggest that the greenback is on its way to a lasting recovery as it's seen as a technical correction following last week's heavy losses. The ongoing investigation of Russian interference in the 2016 presidential election continues to keep investors away from the greenback. Moreover, Trump administration's inability to repeal and replace Obamacare last week brought the uncertainty regarding the timing and the success of more significant policy changes like the tax reform and infrastructure overhaul. 

• Federal Reserve will be the central bank of attention - UOB

The economic calendar seems pretty quiet until the FOMC announces its monetary policy decision and releases its statement on Wednesday. Although no changes are expected, investors will be focused on the declaration of a precise timing for the start of the balance sheet reduction. James Knightley, Senior Economist at ING, argues that if the Fed were to start the process in October, only USD197bn of the USD425bn in maturing Treasuries in 2018 would still be reinvested.

• July FOMC meeting, an opportunity to give guidance on balance sheet normalization - BBVA

Technical outlook

The 94 mark is seen as the initial hurdle for the index. A daily close above that level could allow for a sustained recovery move towards 95 (psychological level/Jul. 20 high) and 95.60 (Jul. 14 high). On the downside, supports could be seen at 93.55 (Jun. 20, 2016, low), 93 (psychological level/Jun. 23, 2016, low) and 92.50 (May 2, 2016, low).

Today's data from the U.S.

• US: Sharpest expansion of US private sector output for six months in July - Markit
• US: Total existing-home sales decreased 1.8 percent - National Association of Realtors