Given a tight labor market and higher-than-expected inflation figures for February, the Fed will have to make a very difficult decision. That is why the US dollar moved to a consolidation phase earlier this week. It has been trading in a narrow range of 103.1-103.3 for some time.

It still resists bearish pressure. However, on Wednesday morning, it dipped lower. The US dollar index is moving near a 5-week low of 103.2 versus its main rivals.

Moreover, technical indicators signal a further downward movement. The greenback may enter the horizontal support area of early January between the levels of 102.65 and 102.55. However, it may also advance to the resistance level of 104.25

The yen regained ground following the weakness of the US dollar. However, there was also another strong driver that helped the yen climb.

Chief Cabinet Secretary Hirokazu Matsuno stressed that the government would allocate more than 2 trillion yen from reserves to protect households from rising prices. The joint efforts of the government and the Bank of Japan could boost the yen in the long run. It has been weak in recent months, boosting import prices. In turn, it undermined the standard of living.

Hirokazu Matsuno’s statement bolstered bullish sentiment in the stock market. Financial companies scored the biggest gains. For example, Mitsubishi and Mizuho Financial shares grew by 3%. Sumitomo Mitsui stock advanced by 2.8%. Shares of Keyence, the leading supplier of sensors and measuring devices, increased by 3.2%

Against the backdrop of eased concerns over the banking crisis and positive statements from the Japanese government, the yen rose as a safe haven asset. Its price advanced to 132.5. Even improved risk appetite did not spook the bulls. So, the yen kept moving in the channel of 132.2-132.8.

In the afternoon, the trajectory of the dollar/yen pair will depend entirely on the Fed’s rate decision and Jerome Powell’s speech. If Powell makes hawkish statements, the US dollar may recover. If so, the pair may approach the resistance levels of 133.6 and 134.

The RBA is now less hawkish than the Fed. So, the Fed meeting and Powell’s testimony will inevitably lead to sharp price changes in the AUD/USD pair.

On Wednesday morning, the Aussie was trading in the upward range of 0.6661–0.6705. However, its growth to 0.6691 looks unstable as the US session and the Fed meeting are approaching. The volatility of the Aussie could increase.

In the event of a dovish move by the Fed, the AUD/USD could climb to the resistance level of 0.6712 and Tuesday's high of 0.6726. However, a return to the support levels of 0.6635 or even 0.6600 is more likely.

The prospects of the New Zealand dollar look more dismal given the country’s weakened economy. However, today, the kiwi was able to rise to 0.6217. Bulls and bears are tussling before the Fed meeting. So, the pair consolidated in the range of 0.6172-0.6223.

00:00 Intro
00:28 CME FEDWATCH TOOL
01:31 VIX
01:58 Janet Yellen
02:48 USDX
03:50 USD/JPY
05:50 AUD/USD
06:46 NZD/USD


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