**US Dollar Price Action Setups Ahead of the FOMC: EUR/USD, USD/JPY, USD/CAD, and GBP/USD**
*Originally reported by James Stanley via Forex.com*
As the global financial markets brace for the next Federal Open Market Committee (FOMC) meeting, the US dollar (USD) remains in sharp focus. Economic signals from the United States continue to offer conflicting views with a resilient labor market, stubborn inflation trends, and a central bank that remains data-dependent. Traders now turn to technical setups in major currency pairs, including EUR/USD, USD/JPY, USD/CAD, and GBP/USD, to prepare for volatility that often follows key FOMC updates.
This article dives into pre-FOMC trading themes and critical price levels across these major FX pairs, drawing from analysis by James Stanley at Forex.com, while synthesizing data from additional reliable sources like DailyFX, Investing.com, and TradingView to offer a comprehensive 1,000-word outlook.
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## What to Expect From the Federal Reserve
The FOMC is not expected to cut interest rates in the upcoming meeting. In fact, stronger-than-expected inflation data and signs of economic resilience argue against any near-term monetary policy easing.
– **Core PCE inflation**, the Fed’s preferred inflation gauge, remained sticky around 2.8% year-over-year in the latest reading for April.
– The **non-farm payrolls (NFP)** data showed the US economy added 272,000 jobs in May, far exceeding expectations of 185,000, according to the Bureau of Labor Statistics.
– **Wage growth** accelerated while the **unemployment rate** rose slightly to 4.0%, giving the Fed a mixed but cautiously hawkish narrative.
Fed Chair Jerome Powell has reiterated that the central bank will not commit to cuts until inflation shows clearer signs of returning to the 2% target. The dot plot due on FOMC day will likely show fewer expected cuts for 2024 compared to the prior forecast in March. The risk, therefore, leans toward a more hawkish outcome.
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## US Dollar Index (DXY): Consolidation Near Key Resistance
The US Dollar Index has traded in a relatively tight consolidation pattern, hovering between 103.85 and 105.15 ahead of the FOMC.
– This **range highlights uncertainty**, with dollar bulls hesitant to commit before more clarity on rates.
– The 105.00 resistance zone represents a **confluence of technical resistance**, previously acting as support in late 2023 and resistance in April and May 2024.
– A break above 105.15 post-FOMC could trigger a bullish breakout, targeting the March high near 105.90 and possibly testing the 107.00 level seen in November 2023.
However, a disappointing Fed outcome could pressure the index back toward support at 103.85, and possibly to the 103.00 psychological area.
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## EUR/USD: Key Support Test and Bearish Momentum
The euro-dollar pair has been under pressure as the European Central Bank (ECB) recently delivered a 25-basis-point rate cut—the first among major central banks to begin easing. This contrasts sharply with the Fed’s current hawkish stance, resulting in EUR/USD weakness during early June.
Key Technical Insights for EUR/USD:
– The pair is testing the **1.0700 support zone**, which has been significant since mid-May.
– A multi-week downtrend has emerged since the pair topped at 1.0895 in late May.
– A breach below 1.0700 opens the door to further downside toward 1.0600 near the April lows.
However, the longer-term picture remains more balanced:
– The **200-day moving average** sits slightly below at approximately 1.0770, a level eyed by technical traders for pivot signals.
– A bounce from 1.0700 with a break above
Read more on USD/CAD trading.