Post-FOMC US Dollar Price Set Up: USD/JPY, USD/CHF, USD/CAD

Talking Points:

There were no major surprises at yesterday’s FOMC meeting as the Fed maintained monetary policy unchanged, keeping its accommodative policies in place. Fed Chair Powell recognized in his statement that “indicators of economic activity and employment have strengthened” but he also pointed out that the “recovery remains uneven and incomplete”.

On the topic of inflation, of which many investors were keeping an eye out for the specific wording around it, Powell mentioned that the “transitory rise in inflation this year would not meet the standard for raising rates” meaning that “nearzero rates appropriate until goals are met”. He stood by his statement that the economy is still a long way away from achieving its goals, so it is not yet time to start thinking about tapering.

Overall, the Fed has once again downplayed inflation risks despite various commodity prices shooting up in the last few weeks. The US Dollar saw increased selling pressure post-FOMC, bringing the Dollar Index (DXY) to a two-week low, slipping below the 90.67 short-term support, putting the currency at risk of further reversal against other major pairs.

USD/JPY Levels

The recent uptick in US yields as investors were gearing up for a possible hawkish underpinned the Dollar performance in the last few sessions, and this was most evidently seen against the Japanese Yen. USD/JPY breached the 109.00 mark briefly in yesterday’s session, but the move was mostly on the back of yen weakness, as the Asian currency has been weakening against multiple currencies. A sustained break above the 109.00 level opens the door for a move towards 110.00 although buyers are likely to face resistance in the move higher, with immediate resistance at the 23.6% Fibonacci at 108.996. To the downside, a break below 108.44 puts USDJPY at risk of falling below the 108.00 mark, where strong support follows at the 107.835 line.

USD/JPYDaily chart

USD/CHF Levels

USD/CHF traded with a strong negative bias in yesterday’s sessions, breaking below 0.91 for the first time since March 1st. The pair found strong support on the 200-day SMA, after seeing a bullish cross of the 100-day over the 200-day SMA just a few sessions before. But yesterday’s move lower has reinforced the bearish argument to bring USD/CHF back towards the 0.89 area, where the pair consolidated back in December 2021. With that being said, momentum indicators are suggesting a bullish reversal before any further downside can be achieved, so if the 200-SMA support holds throughout this week then we may see the pair push higher towards the 0.92 mark, where it is likely to face increased resistance.

USD/CHF Daily Chart

Post-FOMC US Dollar Price Set Up: USD/JPY, USD/CHF, USD/CAD

USD/CAD Levels

The recent weakness in the US Dollar has probably been most evident against the Canadian Dollar. USD/CAD has dropped 2.9% to 1.2299 since bouncing off the 100-day SMA at 1.2654 on Wednesday last week. The Canadian Dollar has been outperforming after last week’s more hawkish BOC meeting, followed by stronger than expected domestic retail sales. The pick-up in commodity prices is also helping to keep positive momentum in the loonie, so expect to see USD/CAD heading lower if we see further weakness in the US Dollar. The recent moves leave the 1.2250 area as the next support, which is the 2018 low. If it is broken, the next reference would be the 1.2170, just shy of the 2017 low of 1.2063.

USD/CAD Weekly Chart

Post-FOMC US Dollar Price Set Up: USD/JPY, USD/CHF, USD/CAD

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin

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