The USD index briefly rallied to 110.87 before retreating marginally
The US dollar rallied to fresh multi-year highs just below the 111.00 mark before retreating marginally in recent trading. The safe-haven demand added to dollar’s strength ahead of the Fed’s crucial decision. A hawkish hike could push the greenback to fresh long-term tops later in the day, with the 111.00 level in focus. The USD index briefly rallied to 110.87 and was last seen trading up nearly 0.5% on the day. Against this backdrop, EURUSD extended the plunge from yesterday when the pair fell back below the 20-DMA. The euro has settled around 0.9900 in early European trading, shedding 0.60% on the day. The decline suggests that despite the recent bounce, the euro remains vulnerable to fresh losses in the near term, with the path of least resistance remaining to the downside while below at least the 1.0300 mark where the descending 100-DMA arrives.
The cable failed to hold above the 1.1350 support zone and fell towards fresh 1985 lows around the 1.1300 figure on Wednesday. After the initial plunge, the GBPUSD pair bounced slightly but remained in negative territory, staying on the defensive as the US dollar surged across the board. The pound was last seen changing hands around 1.1343, down 0.3% on the day. In the near term, GBPUSD needs to hold above 1.1300 on a daily closing basis in order to avoid an even deeper retreat. On the upside, should the cable resume its recovery, the initial target now arrives around 1.1420, followed by the 1.1470 region and the descending 20-DMA, today at 1.1550. On the hourly timeframes, the RSI holds in neutral territory, turning slightly higher now. Still, the path of least resistance remains to the downside for the time being, especially as risk aversion persists across the markets.
USDJPY has been retaining a modest bullish bias since the start of the week, holding onto the upper end of the trading range. The pair stays resilient these days, albeit refraining from revisiting 24-year tops registered around 145.00 earlier in the month. The dollar has settled around 143.70 on Wednesday, with the 144.00 zone representing the immediate resistance at this stage. The USDJPY pair looks set to extend the ascent both in the short- and medium term due to widening divergence in monetary policy as the Bank of Japan keeps maintaining a dovish stance. After some hesitation, USDJPY could climb back to the mentioned tops and refresh multi-year highs beyond 145.00. The next upside target could be expected around 147.00. On the downside, the key near-term support is represented by the ascending 20-DMA, today at 141.60.
USDCHF looks relatively steady and resilient these days, holding around 0.9650 on Wednesday. The pair finished unchanged in the previous session to regain a modest bullish bias today. Earlier in the day, the dollar briefly jumped to 0.9683 before retreating partially. The pair is likely to push north after some consolidation as the greenback could receive extra boost from the Fed decision later today. Should the central bank disappoint, however, USDCHF may fall below 0.9600 in the near term. On the downside, the immediate support arrives at 0.9620, followed by 0.9600 and the 0.9550 zone. Interestingly, the pair faces stiff resistance represented by a combination of the 20- and 100-DMAs that converge around 0.9690. As such, the upside potential remains limited while below this zone.