The US dollar holds the upper hand against most major currencies before the Federal Reserve’s decision, with USD/JPY pulling back from a multi-year high near 164.00 and USD/CAD stalling at resistance near 1.4130. FXOpen expects the Fed’s comments on inflation and the future path of monetary policy to set the direction of both pairs over the coming weeks.
The US dollar continues to hold the upper hand against most major currencies ahead of the outcome of the latest Federal Reserve meeting. The base-case scenario remains for interest rates to stay unchanged, though markets are also pricing in the possibility of an interest rate hike.
Geopolitical uncertainty in the Middle East is another factor supporting the greenback. Despite the temporary suspension of US strikes on Iran and renewed diplomatic efforts, the risk of further military escalation remains, prompting investors to stay cautious ahead of this week’s key events. At the same time, USD/JPY’s approach towards multi-year highs has increased expectations of fresh warnings from Japanese authorities and raised the risk of currency intervention.
USD/JPY pulls back from a multi-year high near 164.00
USD/JPY tested another multi-year high near 164.00 last week, and the pair has entered a modest pullback after that rally. If the Fed delivers a more hawkish outcome or maintains its hawkish tone, the pair could extend its advance towards 165.00–165.50. But a decisive move below 163.30 could trigger a deeper correction towards the 162.00–162.60 support area.
The Fed’s interest rate decision lands today at 21:00 GMT+3, with the FOMC press conference at 21:30. The US Core Personal Consumption Expenditures Price Index follows tomorrow at 15:30 GMT+3.
USD/CAD consolidates below 1.4130 resistance
USD/CAD’s recovery, which followed the formation of a bullish engulfing pattern, has stalled near resistance at 1.4130. The pair is currently consolidating within the 1.4060–1.4130 range. A decisive break above the upper boundary of that range could pave the way for further gains towards 1.4160–1.4200.
Conversely, a move below 1.4060 could lead to a retest of the recent low near 1.4000. Oil prices remain another important driver for the pair, as weaker crude prices continue to limit support for the Canadian dollar and help preserve its bullish potential. US crude oil inventories are due today at 17:30 GMT+3, the Bank of Canada’s Summary of Deliberations at 20:30, and US GDP data tomorrow at 15:30.
The Fed’s guidance decides the next move
The near-term direction of both pairs will depend primarily on the Federal Reserve’s decision and its guidance on the future path of interest rates, according to FXOpen. A more dovish message could trigger a correction in the greenback, particularly against the Japanese yen.
Source: ActionForex
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