The U.S. dollar is little changed against the EURUSD, USDJPY and GBPUSD ahead of the Federal Reserve’s rate decision later today, with all three pairs within 0.09% of unchanged on the day. In the video above, I look at the technical factors driving those three currency pairs and define the bias, the risks and the targets for each. Understanding the roadmap of your trades can help improve trading performance.

The AUDUSD is the biggest mover, falling 0.47% as the U.S. dollar strengthens. Australia’s June CPI report was softer than expected, with headline inflation falling 0.1% on the month versus expectations for a 0.2% increase. The annual inflation rate eased to 3.8% from 4.0%, also below forecasts. The Reserve Bank of Australia’s preferred trimmed mean CPI matched expectations at 0.3% month over month, but slowed from the prior month’s 0.4% increase, suggesting underlying inflation pressures continue to moderate. Overall, the report is likely to reinforce expectations that the Reserve Bank of Australia can remain patient on further policy tightening, reducing the near-term urgency for another rate hike. Technically, price fell below the swing area and trendline support, which held yesterday, giving sellers the go-ahead to push lower.

The Federal Reserve will announce its policy decision today at 2:00 PM ET, followed by Chairman Kevin Warsh’s press conference at 2:30 PM ET. This meeting has become one of the most uncertain in years, with Warsh offering little forward guidance and recent economic data sending mixed signals. That combination helps explain why the dollar is holding steady before the announcement: traders are waiting for the statement and press conference to clarify whether policymakers are more concerned about easing inflation or about maintaining restrictive policy for longer.

What the market expects:

• Base case: No change in the federal funds rate at 3.50%-3.75%.
• Market pricing: Roughly 68.5% odds of no change and 31.5% odds of a 25-basis-point hike.

Why the Fed may hold:

• June inflation cooled from May’s elevated readings.
• Oil prices have dropped sharply over the past week, easing some inflation concerns.
• Recent economic data, including softer consumer confidence and labor indicators, point to moderating growth.
• Holding rates would give policymakers additional time to assess incoming GDP and inflation data.

Why a hike remains possible:

• Inflation remains above the Fed’s 2% target.
• Some policymakers have argued that policy should remain restrictive until inflation is clearly under control.
• Chairman Warsh has repeatedly emphasized restoring price stability and has avoided signaling his intentions ahead of meetings, increasing the risk of a surprise.

What markets will focus on:

• Any changes to the statement language.
• Whether there are dissenting votes from hawkish members.
• Warsh’s comments on inflation, labor markets and the recent decline in oil prices.
• Any indication of whether September is “live” for a rate move.

What the market implications could be:

• Hold with balanced or hawkish language: Likely limited initial reaction, with markets quickly shifting focus to Warsh’s press conference.
• Hold with dovish language: Stocks could extend gains, Treasury yields may fall, and the U.S. dollar could weaken.
• 25-basis-point hike: Likely the biggest market-moving outcome, potentially lifting the dollar and Treasury yields while weighing on equities, particularly growth and technology stocks.

The geopolitical backdrop turned more tense overnight after a brief lull in hostilities.

The U.S. and Saudi Arabia reportedly carried out joint strikes against Iran-backed militias in Iraq after recent attacks linked to Tehran-backed groups. The strikes mark another escalation in the regional conflict and suggest the pause in military action has effectively ended.

Iran launched another missile attack targeting U.S. forces, but U.S. officials said the missiles were intercepted. Tehran has also warned of further retaliation if additional military action is taken against Iran.

Shipping risks remain elevated. Iran-backed forces continue to pressure energy routes, with renewed concerns around the Strait of Hormuz and Red Sea shipping lanes, although broader maritime traffic has not been shut down. That matters for markets because energy and transport disruptions can quickly feed into broader inflation expectations, which keeps attention on both the Fed decision and the overnight headlines.

Prime Minister Benjamin Netanyahu’s visit to Washington remained the dominant diplomatic story. Key takeaways from the meeting:

• The leaders focused primarily on Iran, regional security and preventing Tehran from obtaining a nuclear weapon. Despite reports of differences over strategy, both sides characterized the discussions as positive and productive.
• Iran remains the central issue. Netanyahu reportedly emphasized that Israel’s red lines remain unchanged, including preventing Iran from rebuilding its nuclear program and maintaining pressure until those objectives are achieved.
• Diplomacy is still being explored. Regional mediators continue working on a framework that could eventually reopen negotiations between the U.S. and Iran, including proposals aimed at stabilizing shipping through the Strait of Hormuz. Those discussions remain preliminary and depend heavily on U.S. approval.
• Political headwinds are growing. Several reports note that while the meeting was cordial, Netanyahu faces increasing political pressure domestically and in Washington as the conflict enters another prolonged phase.

U.S. stocks are mixed to lower in premarket trading:

• Dow industrial average: -222 points
• S&P: unchanged
• Nasdaq: -21 points

In the U.S. Treasury market, yields are higher:

• 2-year yield: 4.313%, +3.6 basis points
• 5-year yield: 4.396%, +3.5 basis points
• 10-year yield: 4.626%, +2.2 basis points
• 30-year yield: 5.101%, +5.1 basis points

In other markets:

• Crude oil futures are higher by $3.60 at $82.90
• Gold is little changed at $4,030
• Silver is up $0.53 at $57.62
• Bitcoin is up $525 at $64,380