The dollar correction is in full swing as sellers explore new June lows, and this was largely influenced by the moderately positive CPI report for May:

The core inflation retreated from 5.5% to 5.3%, in line with expectations, while headline inflation was slightly lower at 4% YoY compared to the consensus forecast of 4.1%. The risk lied in a surprise on the upside (i.e., inflation above 0.4% on a monthly basis), as it would have maintained some uncertainty regarding tomorrow's Federal Reserve meeting. The data in line with projections almost rule out a hawkish decision by the Fed tomorrow, and a rate hike is likely to be postponed. Therefore, the main question that Powell will address tomorrow is whether this is truly a pause or something more significant. The degree of confidence expressed in the July hike will determine the chances of a dollar rebound. 

It is worth noting that in the history of the Fed monetary decisions, pauses in rate hikes often turned out to be the end of tightening cycles. Judging by the fact that the US stock market is hitting new highs this year (S&P 500 futures have already risen to 4400 points), investors seem to be in a hurry to price in the scenario that the interest rate has already peaked.

The technical chart of the dollar index indicates that the decline in the dollar could extend to around 102.60, where the lower boundary of the channel will be. Considering the upward trend since the beginning of May, a characteristic "flag" pattern is forming, which often precedes a continuation of the trend. Therefore, shorting the dollar is likely advisable with very short-term targets and the ability to quickly adapt to an upward trend if the price confidently bounces off the lower boundary of the corrective channel.

An interesting situation is developing in the GBPUSD pair as well: on Tuesday, the price retested the key resistance line:

The potential upside breakout is strongly supported by fundamental reasons: employment in the economy grew significantly higher than expected in May (250K versus a forecast of 162K), and unemployment also broke its upward trend, with the level decreasing from 3.9% to 3.8% in May despite expectations of an increase to 4%. Within the framework of the inflation-unemployment relationship, it is difficult to expect inflation to move towards the target without the help of the central bank. Markets have already priced in at least one rate hike by the Bank of England, and they are partially factoring in a second hike in August. A wavering position of the Fed tomorrow is likely to allow the pair to break through 1.26, and at that point, it will be challenging to hold back buyers. The medium-term target will shift to the level of 1.30.