The US Dollar Moderately Declines Amid Expectations of a Fed Rate Cut

The major dollar pairs, particularly USD/JPY and USD/CAD, remain under moderate pressure as market participants react to a softer US inflation backdrop and heightened expectations of a Federal Reserve rate cut at the upcoming meeting. Additional downward pressure on the greenback stems from US Treasury Secretary Scott Bessent’s remarks, in which he allowed for a 50 bps reduction as the opening move in a monetary easing cycle. Against this backdrop, the US currency is giving up part of its recent gains; however, its further trajectory will depend on incoming data.

Today’s focus is on US releases that could trigger heightened volatility and potentially lead to a breakout of key ranges: initial jobless claims and a batch of data on the headline and core Producer Price Index (PPI). Market reaction to these indicators could prove pivotal: signs of cooling price pressures and a weakening labour market may reinforce expectations for a deeper rate-cut trajectory, whereas strong readings could restore some support for the dollar.

USD/JPY
Following a sharp rebound from 150.90 and the formation of a bearish engulfing reversal pattern, USD/JPY has been consolidating for the second consecutive week within the 146.60–148.60 range. Early this week, buyers attempted to break through resistance at the upper boundary of this range. Technical analysis suggests a possible test of 145.80–146.00, as the failed breakout attempt resulted in the formation of a dark cloud cover pattern. A sustained move above 147.00 could pave the way for a return to the upper boundary of the range.

Key events that may influence USD/JPY’s direction:

• Today, 15:30 (GMT+3): US Initial Jobless Claims
• Today, 15:30 (GMT+3): US Producer Price Index (PPI)
• Tomorrow, 02:50 (GMT+3): Japan GDP

USD/CAD
After a two-week bullish run that stalled at 1.3880, USD/CAD is trading in a narrow 1.3720–1.3800 range. A break below the lower boundary could open the way for a test of the key 1.3700 support level. Conversely, a decisive close above 1.3800 could lead to a retest of the August high.

Key events that may influence USD/CAD’s direction:

• Today, 21:00 (GMT+3): Speech by FOMC member Thomas Barkin
• Tomorrow, 15:30 (GMT+3): US Core Retail Sales
• Tomorrow, 15:30 (GMT+3): Canada Wholesale Sales

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