Over the past couple of weeks, the dollar has been losing ground, but has rallied a bit recently to retain its title of favorite to maintain its reign at the top of the major currencies towards the end of the year. Much will depend on the Fed and the rate forecast offered, making it one of the the most important FOMC meetings in recent months.
The whole debate is about whether or not the Fed will pivot, and that is the main focus of the key risk event later today. For now though, the dollar is holding a decent position – albeit slightly lower on the day so far. Let’s take a look at the charts.
In the case of USD/JPY, volatile swings persist after another round of intervention by Japanese authorities last month. That said, the pair still remains rather stuck between 145 and 150 at the moment – waiting for a firm break on either side for buyers and sellers to exert their will on price action.
Meanwhile, EUR/USD rallied above parity last week, but the bullish movement stalled after testing the 100-day moving average (red line). The dollar then stabilized and we see the pair falling again, with the ECB playing along last week. It is now up to the Fed to determine if there is appetite for the dollar to maintain its lead against the euro – as long as the political status quo remains.
In the case of GBP/USD, the pair appeared to rally above 1.1500 last week, but the gains were not large enough to challenge key technical levels on the daily chart. Buyers lost steam above 1.1600 and sellers took the opportunity to regain some near-term control, where we see price action stabilizing at this time.
The bounces in and around the 100 (red line) and 200 hourly moving averages (blue line) show how the price action is developing and it will take a break on either side for the pair to really gain momentum after. the Fed this week. A break above the first will allow for a potential push towards the 100-day moving average at 1.1713, while a break below the second should lead to another drop towards 1.1200 for Cable.
AUD/USD is another chart to be wary of after rallying towards 0.6500 amid dollar weakness in the latter stages of last month. The sellers held at the key level before the RBA’s lack of momentum cemented the price action below that and we are seeing a bit of a tussle between the major hourly moving averages this week.
Similar to Cable, this is where buyers and sellers are battling now and we’ll have to see how the post-Fed narrative impacts price action later today.
If the bulls have enough reason to climb above the 100 hourly moving average (red line) and break above 0.6500, there is a strong case for an upside correction. However, break below the 200 hourly moving average (blue line) and we can start looking towards another potential test of 0.6200 in the future.