The US dollar index has been drifting higher amid solid economic data from the US and the worries about the coronavirus. The greenback has been consolidating gains for the fourth week in a row amid low volatility. Today the Fed’s policy meeting is sure to take center stage. This crucial event could trigger at least short-term trends in financial markets. The policy update of the Federal Open Market Committee will hardly spark off sharp fluctuations of financial instruments. At the latest policy meeting, the central bank stated clearly there are no weighty arguments for adjusting the federal funds rate this year. Nevertheless, investors are anticipating the press conference of Fed’s Chair Jerome Powell. Investors will want to hear whether Mr. Powell retains his cautiously upbeat rhetoric. So, his comments are likely to change trajectories of currency pairs.
The US dollar index is trading near two-month highs ahead of the Fed’s policy decision which will be unveiled two hours before the end of the New York trade. Such expectations restrain moves of the US currency. Its index opened the New York trade at the level slightly above 98.
Yesterday the US dollar could not test resistance against the safe haven yen, but today everything is changing. The dollar’s strength is mirrored in the bond market. The differential between US Treasuries and Japan’s government bonds has been on the rise. Besides, the US stock market has been rallying. Investors are encouraged by upbeat corporate reports and macroeconomic data. In this context, it would be a good idea to plan long deals on the dollar/yen pair.
The Canadian dollar is making a correctional decline after yesterday’s gains. In the New York session, the USD/CAD pair is trading at near 1.3179. The bullish outlook remains valid. Analysts do not rule out that the currency will be able to test 1.3214 and higher levels. On the other hand, if the pair sinks below 1.3137, the bullish outlook will have to be canceled.
After the US central bank unveils its policy update today, traders will shift focus towards macroeconomic data. Market participants are also keen to check whether the regulator is going to intrude into the economy with a view to policy easing. Perhaps, the outbreak of the deadly coronavirus in China made an impact on the Fed’s forecasts.
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