**Pre-FOMC U.S. Dollar Technical Outlook: Key Price Action Setups in EUR/USD, USD/JPY, USD/CAD, GBP/USD**
*Original analysis by James Stanley, Forex.com*
As markets anticipate the upcoming Federal Open Market Committee (FOMC) decision, the U.S. dollar is showing pivotal technical setups against several major currencies. With expectations that the Fed will maintain its policy trajectory—with at most one rate cut this year—traders are scrutinizing the greenback’s next move closely. Despite softening inflation data, the Fed is expected to remain cautious. This article outlines critical price action levels for four major currency pairs: EUR/USD, USD/JPY, USD/CAD, and GBP/USD, incorporating insights from the original article by James Stanley and supporting information from other financial sources like DailyFX, Investing.com, and Bloomberg.
Let’s explore the U.S. dollar’s technical landscape ahead of the FOMC and identify potential trade setups.
## Overview of Market Sentiment Ahead of FOMC
The Federal Reserve’s policy stance has become increasingly nuanced. Despite easing inflation pressures, policymakers remain wary of loosening policy too quickly. While market participants continue to factor in a high likelihood of at least one rate cut in 2024, this forecast has moderated in recent weeks.
– According to CME’s FedWatch Tool, the probability of a cut in September remains above 40%, but notable uncertainty surrounds future projections.
– Treasury yields have stabilized, though still elevated from levels seen earlier in the year.
– The U.S. Dollar Index (DXY) remains resilient, hovering around the 104.50–105.00 zone, showing that market participants are cautious ahead of the Fed’s updated Summary of Economic Projections (SEP) and dot plot release.
Now let’s examine the key technical levels and price action implications for the major USD pairs.
## EUR/USD: Key Resistance Holds as Bulls Struggle for Momentum
EUR/USD has spent much of the past few weeks attempting to regain bullish momentum, only to run into strong resistance near the 1.0900–1.0916 zone.
– Historically, the 1.0916 level represents the March swing high and recent rejection point.
– Over the past five trading sessions, EUR/USD has attempted multiple probes into this area, but resistance remains strong.
– A failed break attempt on June 7 quickly reversed after a hot U.S. jobs report, which saw higher-than-expected NFP jobs growth and a surprising tick-up in wage inflation.
If EUR/USD fails to break through this resistance, it suggests that the pair may be carving a near-term top.
Key Technical Levels for EUR/USD:
– Resistance:
– 1.0916 – March and June swing high
– 1.1000 – Psychological resistance; also a long-term reversal level
– Support:
– 1.0850 – Intra-day support zone
– 1.0800 – Psychological level, followed by
– 1.0723 – Early June swing low
Technical Indicators:
– The EUR/USD daily RSI nears overbought territory, warning of a potential pullback.
– MACD remains positive but is beginning to flatten, supporting near-term consolidation.
Trade Strategy:
– A bearish reversal signal near 1.0916 could support short positions targeting 1.0800 or lower.
– A confirmed breakout with daily close above 1.0916 opens the way towards 1.1000 and even 1.1094 (April high).
## USD/JPY: Fresh 2024 Highs Despite Intervention Risks
USD/JPY has powered higher, reaching new 2024 highs above the psychologically crucial 157.00 mark. This move came despite repeated warnings from Japanese authorities about potential FX intervention.
– Last week’s NFP report and strong U.S. data helped to boost Treasury yields, supporting yield divergence in favor of the dollar.
– The
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