Should the bank deliver a less hawkish message, the greenback may come under more intense downside pressure
The US dollar failed to challenge the 112.00 figure on Tuesday to come under some selling pressure after four bullish sessions in a row. The USD index retains a mild bearish tone on Wednesday as traders turned cautious ahead of the Federal Reserve monetary policy decision.
The central bank is widely expected to raise rates by 0.75% in its ongoing effort to fight high inflation, but investors will monitor Powell’s press conference for signs of a slowing tightening pace. In other words, market participants are looking for a signal that the central bank is prepared to slow the pace of its rate-hiking plan come December.
Should the Fed deliver a less hawkish message, the greenback may come under more intense downside pressure in a knee-jerk reaction to the meeting outcome. The DXY could get back below 111.00, with the next support coming at 110.70, followed by the 110.20 zone and the 109.55 zone that capped the sell-off last week.
On the upside, the nearest barrier for USD bulls arrives at 111.80, followed by the 112.00 mark and the 112.55 intermediate resistance on the way towards 114.00.
Elsewhere, the USDJPY pair has been losing ground for the second session in a row on Wednesday. The dollar is flirting with the ascending 20-DMA after a failure to regain the 149.00 level at the start of the week. Should the pair finish below the moving average, today at 147.60, the near-term technical picture will deteriorate somehow, but a broader uptrend is likely to stay intact while above the 125.00 zone last seen in April. As a reminder, USDJPY notched fresh multi-year highs around 152.00 in October to finish the third consecutive month with solid gains.