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USD/JPY and USD/CAD eye resistance as Fed signals loom
The dollar’s near-term direction may hinge on whether the Fed is more hawkish or dovish, with USD/JPY’s next move influenced by Japan’s growing intervention risk near multi-year highs.
The US dollar was holding a stronger tone versus major currencies ahead of a fresh Federal Reserve decision, as markets weigh the base case of unchanged rates against the possibility of a rate hike. Action Forex said the Fed’s outlook on inflation, economic conditions, and the future path of monetary policy is expected to drive the dollar’s direction in the coming weeks.
The outlet also pointed to geopolitical uncertainty in the Middle East as an additional factor supporting demand for the US currency as a safe-haven asset, despite a temporary suspension of US strikes on Iran and renewed diplomatic efforts. At the same time, USD/JPY’s approach toward multi-year highs has raised expectations of renewed warnings from Japanese authorities and increased the risk of currency intervention.
In USD/JPY, the pair tested a multi-year high near 164.00 last week and then pulled back modestly. Action Forex said a more hawkish Fed outcome could keep the advance going toward 165.00 to 165.50, while a drop below 163.30 could open the door to a deeper correction toward 162.00 to 162.60.
For USD/CAD, oil prices were described as a key driver, with weaker crude continuing to limit support for the Canadian dollar. The pair’s recovery after a bullish engulfing pattern has stalled near 1.4130, and it is consolidating in a 1.4060 to 1.4130 range, with Action Forex citing upside toward 1.4160 to 1.4200 on a break higher and a potential retest of a recent low near 1.4000 if it falls below 1.4060.
Latest closeWTI crude $81.23 ▼1.7%|USD/JPY 163.85 ▲0.1%