Dollar Holds Near Key Levels Ahead of the Fed Verdict

The US dollar remains well supported against most major currencies, although the next phase of its movement will largely depend on the outcome of the Federal Reserve meeting. Investors are adopting a cautious stance ahead of the interest rate decision, the release of updated FOMC economic projections, and Jerome Powell’s press conference. Particular attention will be paid to policymakers’ forecasts, as these could reshape expectations regarding the number of potential rate cuts before the end of the year.

Market participants will also focus on a fresh batch of US economic data. Today’s retail sales figures are expected to provide further insight into the strength of consumer demand in the United States. Investors will also monitor Canada’s New Housing Price Index ahead of the Fed decision. While the Fed is widely expected to leave rates unchanged, the key driver for markets will be any signals regarding the future path of monetary policy and the timing of possible rate cuts.

USD/JPY

Sellers in USD/JPY managed to trigger a correction towards 159.50 last week. However, they failed to develop a sustained downward move, and the pair is once again trading above 160.00. Technical analysis of USD/JPY points to range-bound trading within the 159.50–160.70 corridor. It appears that investors require clearer guidance from the Fed regarding the future direction of monetary policy.

Key events for USD/JPY:

• Today at 15:30 (GMT+3): US Core Retail Sales;
• Today at 16:30 (GMT+3): speech by US President Donald Trump;
• Today at 21:00 (GMT+3): Federal Reserve interest rate decision.

USD/CAD

USD/CAD reached fresh yearly highs last week and tested the psychological resistance level at 1.4000. Following the breakout above the year’s previous peak, the pair has entered a consolidation phase within the 1.3950–1.4020 range. A sustained move below 1.3950 could trigger a corrective decline towards the 1.3850–1.3900 area. Conversely, a decisive break and close above 1.4000 could pave the way for further gains towards the next significant resistance zone near 1.4130.

Key events for USD/CAD:

• Today at 15:30 (GMT+3): Canada New Housing Price Index;
• Today at 17:30 (GMT+3): US Crude Oil Inventories;
• Tomorrow at 15:30 (GMT+3): Canada Raw Materials Price Index (RMPI).

The dollar remains close to important technical levels against both the Japanese yen and the Canadian dollar, but the next directional move is likely to be determined by the outcome of the Federal Reserve meeting. Should the Fed maintain a hawkish tone and reaffirm its cautious approach to rate cuts, USD/JPY and USD/CAD may extend their gains and attempt to break through current resistance levels. A more dovish message from Powell, however, could encourage profit-taking in the dollar and lead to a corrective pullback following the strong rally seen in recent weeks.

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