DXY +92%: shorts repositioning in a major way on bullish Yellen / hawkish FOMC

Bulls piled into the greenback and lifted the index right up to 92.45 the high where it now consolidates during Yellen's presser on a relatively hawkish outcome in today's FOMC decision and statement. 

• Live Coverage: FOMC September 20th
• FOMC's decisions regarding monetary policy implementation - Sep 20, 2017
• FOMC statements: Comparison between July and September

The DXY has otherwise been in a steady decline from 93.54 since the end of August as markets had been reducing their bets for an improved US economy and subsequent hawkish rhetoric from the Fed with concerns over several measures of inflation behind the Fed's target. The DXY was trading as low as 91.01 at one stage earlier in the month within a 52wk range of between 91.01 - 103.82. DXY is now making for a -9.52% YTD return. 

FOMC main takeaways:

With the dot plot of the Fed's funds rate as the main focus, the FOMC continues to forecast one more hike in 2017, three more in 2018.

• The Federal Reserve left rates in the 1.00%-1.25% range.
• The Fed announced that it will begin to unwind of $4.5 trillion balance sheet in October.
• Hurricanes unlikely to affect the medium-term path of the economy.

However, the dollar has picked up big demand on today's FOMC with the market now pricing in a 70% chance of a rate hike in Demeber compared to 46% prior. This, at first glance, seems quite a move on just the basis that the Fed sees one more hike in 2017 and 3 in 2018, however, looking closer at the Dots, it is starting to look understandable:

Old dot plot:

• 4 Fed members expecting no more hikes this year.
• 8 Expecting one more hike this year.
• 4 Expecting two more hikes this year.
• A media at 2.00-2.25% for year-end 2018.

New dot plot:

• Still only 4 Fed members expecting no more hikes this year.
• 11 expecting another hike this year.
• 1 expecting two more hikes this year.
• 2018 is similar, still three more hikes priced in.
• Terminal rate down to 2.8% from 3.0%.

However, inflation risks are that it can continue to fall below the Fed's 2% target and that is now something that markets are going to paying very close attention to. The DXY could come under pressure again on profit taking, and when noting that short- and medium-term market participants were short dollars in a significant way, analysts at Brown Brothers Harriman noted that this is apparent in the Commitment of Traders data, industry surveys, and indicators from the options market.  "As such, today’s moves may be more about positioning than anything else," they explained.