The USD Continues to Face Pressure Ahead of FOMC Decision

The U.S. dollar remains under pressure against multiple major currencies, taking a hit despite higher Core PCE estimates and favorable Retail Sales data following the recent CPI and PPI reports. Market expectations for the Federal Reserve have shifted, previously anticipating more than 80 basis points of easing by year-end at the peak of risk-off sentiment, to now contemplating roughly 60 basis points. However, this does not seem to have provided any respite from the ongoing USD selloff as all eyes are set on the upcoming FOMC meeting, where the Fed is widely expected to maintain its current interest rates. On the Japanese yen side, current economic data trends are presenting a softer picture alongside dovish commentary from Bank of Japan Governor Ueda, who indicates no immediate rush for rate hikes amidst ongoing uncertainties. The JPY has recently garnered support primarily from risk-off sentiment and declining Treasury yields rather than any noteworthy domestic economic indicators. Despite a recent uptick in risk sentiment and a rebound in Treasury yields, the JPY is beginning to lose traction against a broader range of currencies. The impending BoJ decision tomorrow is expected to maintain the status quo, leaving investors eagerly wondering about future monetary policy directions. Technical analysis of the USD/JPY chart reveals a failure to maintain a drop below the critical 148.60 level, with price retreating back towards a trendline, potentially setting the stage for sellers willing to establish positions for a decline towards 140.00. Conversely, buyers may be looking for a breakout above this trendline to shift their focus to a bullish trajectory leading towards the 160.00 mark. The 4-hour and 1-hour charts indicate that the market is currently defined by minor upward trends showing bullish momentum, yet key resistance levels must be breached for a sustained rally. In broader market news, ongoing geopolitical concerns and risk-on sentiments have kept commodities like gold buoyed, recently reaching around the $3,040 mark per troy ounce. Furthermore, currency pairs such as EUR/USD and GBP/USD continue to showcase volatility, particularly in light of the anticipated FOMC meeting and surrounding economic indicators that could sway market sentiment. It's essential to note that, while this analysis and commentary has been crafted and reviewed with the assistance of artificial intelligence, individual trading strategies and risk tolerance levels will ultimately guide investor decisions. Always conduct thorough research prior to making any trading commitments as the forex market is inherently volatile and presents considerable risks. As always, the content provided is for informational purposes only and does not constitute investment advice.