USD/JPY and USD/CAD Await Key Fed Decision

[FXOpen]

The US dollar is consolidating against the yen and Canadian dollar ahead of the key event of the week — the Federal Reserve meeting. The Fed is widely expected to raise its policy rate by 25 basis points to a range of 3.75–4.00%. As this move is already largely priced in, attention will focus on the updated economic projections, dot plot and press conference. Investors will assess whether the September rate hike marks the beginning of a new phase of monetary tightening or whether the central bank will prefer to adopt a wait-and-see approach.

Expectations of a more hawkish Fed are supported by persistent inflationary pressures, recent employment data and rising oil prices. US retail sales data will provide an additional reference point ahead of the meeting. Strong figures could provide further support for the dollar, although the market reaction is likely to remain limited ahead of the Fed decision.

USD/JPY​

The decline in USD/JPY over the past two weeks has slowed around the key support area of 152.90–153.20. At the start of the week, the price tested this area several times, while buyers managed to establish a foothold above the psychological 155.00 level yesterday. Hawkish Fed rhetoric could support a corrective rise in USD/JPY towards 156.20–157.00. More cautious signals regarding further policy tightening, by contrast, could put renewed pressure on the dollar and lead to another test of the 152.90–153.20 area.

Key events for USD/JPY:

• today at 15:30 (GMT+3): US core retail sales;
• today at 21:00 (GMT+3): US Federal Reserve interest rate decision;
• today at 21:30 (GMT+3): Federal Open Market Committee press conference.

USD/CAD​

USD/CAD has recovered from its recent lows and is testing the 1.3895–1.3940 resistance area, despite support for the Canadian dollar from elevated oil prices. A firm move above 1.3940, followed by the level turning into support, could pave the way for a rise towards 1.4000–1.4030. A failed attempt to establish itself above the current resistance area, by contrast, could trigger a renewed decline towards the 1.3760 support level.

Key events for USD/CAD:

• today at 15:30 (GMT+3): Canadian building permits;
• today at 17:30 (GMT+3): US crude oil inventories;
• today at 18:30 (GMT+3): Federal Reserve Bank of Atlanta GDPNow indicator.

Overall, USD/JPY and USD/CAD remain in consolidation ahead of the key Fed decision. As a 25-basis-point rate hike is already largely priced in, the dollar’s subsequent reaction will depend primarily on the central bank’s projections and rhetoric. Signals pointing to further tightening could support gains in both pairs, while a more cautious Fed stance could put renewed pressure on the US currency.

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[LucasBennet]

Retail sales coming up in a bit is just the appetizer, but man, I'm already sweating the FOMC presser. Everyone is saying 25bps is priced in, but it's always the dot plot and Powell's tone that ruins everyone's day. If we get any hint of more hikes, UJ is going to fly past 156.00 in seconds. Staying flat for now, way too much risk to gamble before the actual release.

 

[Owen Carter 27]

Spot on. Definitely sitting on my hands until the dust settles tonight. Too many fakeouts happen right when Powell starts talking, especially with UJ testing that 153 support and then bouncing. Let the algos fight it out first, I'll look at the daily candles tomorrow morning to see where the real supply and demand zones actually hold.

 

[Mason Brooks]

Honestly, I don't know how anyone is even thinking about taking a position here. If you aren't already flat, you’re basically just flipping a coin and hoping the spread doesn't widen so much it wipes your account out before you can even react.

I’ve got my alerts set, but my hands are firmly in my pockets. If you absolutely have to trade this, I hope your stop losses are wide enough to survive the initial volatility, but personally, I’d rather wait for the dust to settle and trade the follow-through tomorrow. Protecting the capital is the only thing that keeps you in the game for the long haul. Good luck to the brave souls, though.

 

[ArthurByte]

Man, I’m seeing some of you guys playing it way too safe. While you’re all sitting on your hands waiting for the dust to settle, the smart money is already telegraphing the move. I’m looking at that 153.20 level on UJ—there’s a beautiful bullish order block sitting right there that hasn't been properly mitigated yet. If Powell drops even a slightly hawkish tone, we’re going to sweep that liquidity and rip north. I’ve got a small entry mapped out near the FVG just below that support. If it hits, it hits. If I get stopped out, at least I’m not crying about missing the move while I wait for "confirmation" that will probably come 200 pips too late. Protect the capital, sure, but don't be afraid to pull the trigger when the setup is staring you in the face.