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Market update: US dollar subdued ahead of Fed minutes; setups on EUR/USD, USD/JPY, USD/CAD

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US dollar dynamics - anticipating FX market volatility ahead of FOMC minutes release and technical forecasts for major currency pairs.


original-size.webpSource: Bloomberg


Written by: Diego Colman | Market Analyst, New York
Publication date: 

The US dollar fell modestly on Tuesday on the back of subdued US yields in a session lacking significant drivers. Volatility in the FX space, however, may accelerate later in the week, courtesy of a high-impact event on the US calendar on Wednesday: the release of the FOMC minutes.

The minutes will surely provide a greater degree of clarity regarding the central bank’s assessment of the inflation outlook, and the possible timing of the first rate cut, so traders should parse and analyse the document closely. Based on recent comments from several Fed officials, the readout of the last meeting may signal limited interest for immediate rate cuts, in response to stagnating progress on disinflation. This scenario should boost US Treasury yields, bolstering the US dollar in the process.

In the unlikely event that the minutes demonstrate a greater inclination among policymakers to initiate the easing cycle sooner rather than later, the opposite response could materialise, i.e., a pullback in yields and the greenback. Regardless of the outcome, we could see larger FX market swings in the coming days.

Fundamentals aside, the remainder of this article will center on the technical outlook for major US dollar pairs such as EUR/USD, GBP/USD and USD/JPY. Here we'll assess the crucial price thresholds that currency traders should be aware of in the upcoming sessions.

EUR/USD technical analysis

EUR/USD continued its recovery on Tuesday after rebounding from support near 1.0700 last week. If gains persist in the upcoming days, resistance is anticipated around the 200-day simple moving average at 1.0820. Beyond this threshold, all eyes will be on 1.0890, followed by 1.0950.

In the event of a market reversal, initial support can be identified near 1.0725 and 1.0700 subsequently. Bulls will need to vigorously protect this technical floor; failure to do so could result in a pullback towards 1.0650. On further weakness, attention will be squarely on 1.0520.

EUR/USD daily chart


original-size.webpSource: TradingView

USD/JPY technical analysis

USD/JPY ticked down and fell below the 150.00 handle on Tuesday. Should weakness persist throughout the week, support emerges at 148.90, followed by 147.40. Further losses from this point onward may bring the 50-day simple moving average near 146.00 into focus.

On the other hand, if bulls return and push prices back above the 150.00 handle, we could soon witness a retest of the 150.85 region. Although overcoming this ceiling might present a challenge for the bulls, a decisive breakout could usher in a rally toward last year’s high in the vicinity of 152.00.

USD/JPY daily chart


original-size.webpSource: TradingView

USD/CAD technical analysis

USD/CAD consolidated to the upside on Tuesday, further moving away from its 200-day simple moving average and trendline support near 1.3480. If gains gather momentum over the next few days, overhead resistance looms at 1.3545, followed by 1.3585. Above these levels, the spotlight will be on 1.3620.

Conversely, if prices pivot to the downside and head lower, the first floor to monitor is located at 1.3480. This area might offer stability for the pair during a retracement, but in the event of a breakdown, a rapid decline towards the 50-day simple moving average at 1.3415 could be imminent.

USD/CAD daily chart


original-size.webpSource: TradingView




This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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