The Federal Reserve surprised the market yesterday by cutting the dollar rate by 0.5%, with expectations that a similar reduction might occur by the end of the year. The dollar initially dropped sharply following the announcement but then partially recovered after comments from Jerome Powell. The Fed Chair stated that the current decision would not dictate the pace for further rate cuts and should help maintain stability in the labour market under current conditions.

Major currency pairs reacted strongly to the Fed's decision. The GBP/USD pair hit a new high for the year, dropping to 1.3100, while USD/JPY fell to 140.50 before strengthening by more than 200 pips. The USD/CAD pair managed to rise above 1.3600.

USD/JPY

The USD/JPY pair is under dual pressure. On one side, the US regulator is aggressively cutting rates, while the Bank of Japan plans to raise rates after a long period of ultra-low rates. In such conditions, the pair experiences high volatility, with a daily range of 200 pips.

According to technical analysis, the pair is undergoing a corrective pullback after forming a "hammer" pattern on the daily timeframe. Currently, the rise is constrained by a significant resistance level at 144.00. The price has been testing this level for about two weeks, and if buyers fail to hold above it in the upcoming trading sessions, a return to 141.00-140.00 is possible.

Factors influencing USD/JPY include:

• Today at 09:00 (GMT +3:00), the release of the Philadelphia Fed manufacturing index (US).
• Today at 09:00 (GMT +3:00), the release of initial jobless claims in the US.
• Tomorrow at 05:30 (GMT +3:00), the Bank of Japan’s monetary policy report.

USD/CAD

Yesterday, the USD/CAD pair managed to break above 1.3600 and tested the key level of 1.3650. If buyers can maintain the 1.3600-1.3580 range as support, the corrective rise may continue towards 1.3800-1.3700. If the minimum of 1.3440 from yesterday is revisited, the downtrend may resume with renewed strength.

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