Fed Delivers First Cut of 2025, Dollar Sees Sharp Rebound Post-Decision

Key Takeaways:

*The Fed cut rates by 25 bps to 4.00%–4.25%, its first move of 2025, with Powell signaling two more cuts this year.

*The DXY plunged to 96.23—its lowest since Feb 2022—before rebounding above 97.00 as markets adjusted to the smaller-than-feared cut.

*The move eased tensions with the White House and was seen as proactive support for the economy, while gold stayed flat at record highs amid dollar volatility.

Market Summary:

The Federal Reserve lowered its benchmark interest rate by 25 basis points yesterday, moving the target range to 4.00%–4.25% in a decision that marks the central bank’s first cut of 2025 and ends a nine-month pause. The move, which passed with an 11–1 vote, was more dovish than expected, with Governor Miran dissenting in favor of a more aggressive 50bps reduction.

Chair Jerome Powell reinforced the accommodative shift during his press conference, explicitly signaling the likelihood of two additional rate cuts before year-end. The guidance removed significant uncertainty around the Fed’s easing path and was interpreted by markets as proactive support for the economy amid evolving risks.

The U.S. dollar initially sold off sharply following the announcement, with the Dollar Index (DXY) falling to 96.23—its lowest level since February 2022. However, the greenback staged a pronounced recovery, rallying nearly 1% from the session low to trade back above 97.00. The rebound reflected market relief that the Fed avoided a larger 50bps cut, as well as reduced political uncertainty, as the measured easing aligns the central bank more closely with the White House’s preference for lower rates.

Broad risk sentiment improved on the view that the Fed is taking a preemptive stance to sustain economic expansion. Gold held near record highs despite the dollar’s recovery, as ongoing geopolitical concerns and the broader dovish pivot provided underlying support.

Attention now turns to the upcoming U.S. employment and inflation data, which will shape expectations for the timing and extent of additional Fed easing.

Technical Analysis

Dollar Index (DXY), H4:

The dollar index extended its decline after failing to defend the critical support near 96.65, sliding to 96.23—its weakest level in three and a half years. The sharp drop underscored the prevailing bearish momentum weighing on the greenback.

However, the index staged a strong technical rebound from the trough, recovering nearly 1% in the last session. Despite the bounce, the index has yet to clear its prior swing high, keeping the broader structure firmly within a bearish trajectory.

Momentum signals suggest downside pressure remains dominant. The RSI briefly entered oversold territory before edging higher, while the MACD has formed a golden cross near the bottom. Both indicators point to a temporary easing of bearish momentum but stop short of signaling a sustained reversal.

Resistance Levels:97.20, 97.75

Support Levels: 96.65, 95.95

Gold, H4:

Gold prices have surged nearly 10% over the past two weeks, though momentum has eased after the metal touched a fresh all-time high of $3,707. The market has since shifted into a sideways consolidation, signaling a potential cooling of the recent rally.

A key liquidity zone sits near $3,640. Holding above this level would reinforce gold’s broader bullish trajectory, while a sustained break lower could expose the metal to deeper pullbacks.

Momentum indicators are flashing early signs of fatigue. The RSI has retreated from overbought conditions toward the midline, while the MACD is trending in a lower-high formation. Both suggest that bullish momentum is moderating, in line with signals from price action.

Resistance Levels:3697.00, 3738.30

Support Levels: 3620.00, 3575.40