**Pre-FOMC US Dollar Price Action Setups: EUR/USD, USD/JPY, USD/CAD, GBP/USD**
*By David Song, Forex.com*
Markets are on edge ahead of the latest Federal Open Market Committee (FOMC) policy announcement, expecting volatility to rise as traders watch for clues to the future path of US interest rates. The US dollar has been consolidating in recent sessions as investors evaluate macroeconomic data, shifting Fed expectations, and signals from global central banks. In this analysis, we look at the current price action and technical setups for four major USD pairs: EUR/USD, USD/JPY, USD/CAD, and GBP/USD.
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**FOMC Preview: Waiting for a Signal**
For much of 2023 and into 2024, the Federal Reserve’s “higher for longer” stance on interest rates and robust US economic data supported the US dollar. However, as recent inflation prints show gradual disinflation and market-based odds for rate cuts fluctuate, traders are increasingly keen for clarity.
* Market consensus currently expects the Fed to hold steady at this meeting, keeping its policy rate unchanged.
* The Fed’s updated economic projections (the dot plot) and Chair Powell’s press conference are likely to be the main market movers, offering insight into the projected timing and pace of potential policy easing.
* Key factors influencing the FOMC decision include:
– Moderating but still-elevated inflation
– A cooling, but not collapsing, labor market
– Strong consumer spending
– Geopolitical risk and global growth uncertainties
Given this backdrop, the major USD pairs could see marked volatility based on fresh guidance from US policymakers.
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**EUR/USD: Awaiting a Fresh Catalyst**
The euro has spent recent sessions consolidating just below the 1.0900 handle, caught between shifting EUR and USD policy expectations.
* EUR/USD rallied earlier in the year but struggled to break above 1.0900, running into resistance as US Treasury yields halted their decline.
* The European Central Bank (ECB) maintains a dovish bias, with eurozone inflation pressures showing continued moderation. This caps the EUR recovery despite firmer economic signals.
* Technical analysis for EUR/USD:
– Immediate resistance: 1.0890–1.0910 area (recent swing highs, psychological round number)
– Next resistance: 1.1000 (key psychological level, prior swing high)
– Near-term support: 1.0830 (20-day moving average, recent swing low), then 1.0790
– A downside break below these levels could open the path toward 1.0750 and then 1.0700
* Watch for:
– Hawkish surprises from the FOMC to trigger USD strength and push EUR/USD lower
– Dovish tone or economic worries to lift EUR/USD toward the 1.09 and 1.10 markers
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**USD/JPY: Defending Multi-Decade Highs**
The USD/JPY pair remains near its highest levels since the early 1990s, reflecting persistent yield differentials between US and Japanese government bonds.
* The Bank of Japan’s (BoJ) incremental steps away from negative interest rates have failed to provide sustained support for the yen, with rate differentials and yield curve control policy favoring the USD.
* The yen’s safe-haven status could provoke sharp corrections if global risk aversion climbs, but for now, technicals favor further USD/JPY upside while support levels hold.
* Technical analysis for USD/JPY:
– Immediate resistance: 157.00–157.80 (multi-decade highs)
– Next upside targets: 158.50, then 160.00 if momentum persists
– Initial support: 155.80 (recent swing low), then 155.00 and 154.50
* Traders are closely monitoring:
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Read more on GBP/USD trading.