The US dollar continues to hold the upper hand against most major currencies ahead of the latest Federal Reserve meeting. The base-case expectation is that interest rates will remain unchanged, but markets are also pricing in the possibility of a rate hike. The Fed’s decision, along with its comments on inflation, economic conditions and the future path of monetary policy, could determine the direction of the US dollar over the coming weeks. For traders, that makes the meeting and the subsequent data releases a focal point for confirming whether the recent dollar strength is sustained or fades after the event.

Another factor supporting the dollar is ongoing geopolitical uncertainty in the Middle East. Despite the temporary suspension of US strikes on Iran and renewed diplomatic efforts, the risk of further military escalation remains, keeping investors cautious ahead of this week’s key events. Geopolitical uncertainty continues to support demand for the US dollar as a safe-haven asset. At the same time, USD/JPY’s move toward multi-year highs has increased expectations of fresh warnings from Japanese authorities and raised the risk of currency intervention. For USD/CAD, oil prices remain another important driver: weaker crude prices continue to limit support for the Canadian dollar and help preserve the pair’s bullish potential.

USD/JPY

USD/JPY tested another multi-year high near 164.00 last week. After the strong rally, the pair has entered a modest pullback. However, if the Federal Reserve delivers a more hawkish outcome or maintains a hawkish tone, the pair could extend its advance toward 165.00–165.50. A decisive move below 163.30 could trigger a deeper correction toward the 162.00–162.60 support area. With the pair trading near levels that have drawn repeated attention from Japanese officials in recent months, the Fed’s tone may matter as much as the rate decision itself for near-term volatility.

Key events for USD/JPY:

Today at 21:00 (GMT+3): US Federal Reserve interest rate decision;

Today at 21:30 (GMT+3): Federal Open Market Committee (FOMC) press conference;

Tomorrow at 15:30 (GMT+3): US Core Personal Consumption Expenditures (PCE) Price Index.

USD/CAD

USD/CAD’s recovery after the formation of a bullish engulfing pattern has stalled near resistance at 1.4130. The pair is currently consolidating in the 1.4060–1.4130 range. A decisive break above the upper boundary of this range could open the way for further gains toward 1.4160–1.4200. Conversely, a move below 1.4060 could lead to a retest of the recent low near 1.4000. Alongside the Fed outcome, oil inventory data and the Bank of Canada’s Summary of Deliberations give the Canadian dollar a separate set of near-term catalysts, making the pair sensitive to both US policy signals and commodity-linked headlines.

Key events for USD/CAD:

Today at 17:30 (GMT+3): US crude oil inventories;

Today at 20:30 (GMT+3): Bank of Canada Summary of Deliberations;

Tomorrow at 15:30 (GMT+3): US GDP data.

Overall, the near-term direction of both USD/JPY and USD/CAD will depend mainly on the Federal Reserve’s decision and its guidance on the future path of interest rates. A more hawkish stance could support a breakout above nearby resistance levels and reinforce the US dollar’s strength. A more dovish message could trigger a correction in the greenback, particularly against the Japanese yen, where the proximity of multi-year highs increases the likelihood of renewed warnings from Japanese officials. For USD/CAD, oil price movements and the Bank of Canada’s Summary of Deliberations will remain important additional drivers.