The USD was smashed on Friday, as the price broke out of a technical wedge structure. It began to gradually edge south following the FOMC last Wednesday. A near-term breakout and retest of the noted wedge occurred on Thursday, setting the market up for a big USD dump.
A small correction has been observed in early trading on Monday understandable, however, the USD is still at risk of further potential downside. Big data points due out this week; ISM manufacturing PMI, non-manufacturing PMI and jobs data.
What did the FOMC do?
At the rate decision last week, the FOMC detailed that they will be continuing repo operations through at least April of 2020. That is really helping to expand the Fed’s balance sheet, which is having similar influences in the economy to that of QE. A dovish and initially USD negative form of action, pumping money into the markets.
Repo market operations
These operations are a form of short-term lending and borrowing between financial companies. Recently, the rates got a bit out of hand, which was causing a crisis within the markets. The FOMC then had to step in and start conducting such operations themselves, offering this short-term lending facility for financial companies, i.e. banks.
The capital would then be used by banks to lend to consumers. People use this money to borrow, spend and thus stimulate the economy. It would weaken the USD initially because effectively the FOMC is flooding the market with more USD.