There was a bit of a cheer in risk sentiment initially as the Fed hiked by 25 bps and more or less hinted that they will move to the sidelines after. However, Powell didn't convince on that front and markets started to get angsty again as the dust settled. By the end of the day, it was very much a risk-off wave that struck but the dollar was also subdued.
USD/JPY in particular saw a over 1% drop back under 135.00 and is keeping that way for now:
The break below 135.00 sees sellers regain near-term control with scope to extend the downside move towards the 100-day moving average (red line) next at 132.83.
There are also some key technical levels at play elsewhere, such as that for EUR/USD, GBP/USD, and notably gold. But I'll get to them individually later in the day.
For now, the overview for the dollar is that markets are fearing a further hit to US regional banks and that isn't helping. Not only that, there's also the whole debt ceiling issue that is starting to come more into focus as well.
Typically, you would expect the greenback to benefit based on the dollar smile theory, especially in times where there is broad risk aversion in markets. But that isn't proving to be the case, at least not for the time being.
However, I wouldn't rule out that possibility but at the same time, you have to respect the technicals so there's that to consider.
