The US dollar has entered a period of consolidation following last week's sharp price swings, as market participants turn their attention to the release of the Federal Reserve's latest meeting minutes. Investors are looking for additional guidance on the future path of interest rates and whether support for a hawkish monetary policy stance remains widespread within the Fed.

Further uncertainty was created by last week's mixed US labour market data, which raised concerns about the resilience of the US economy but did not trigger a significant reassessment of Federal Reserve policy expectations. Attention has now shifted to the FOMC minutes, with traders focusing on the Fed's assessment of inflation risks and its outlook for future interest rate decisions. Confirmation of a hawkish stance could provide fresh support for the US dollar, while a more cautious assessment of economic conditions may strengthen expectations of future policy easing.

USD/JPY

Against this backdrop, USD/JPY is consolidating after retreating sharply from multi-year highs. The yen remains under pressure due to the wide interest rate differential between the United States and Japan. However, with the pair trading close to multi-year highs, concerns over possible intervention by the Japanese authorities continue to limit further upside.

From a technical perspective, USD/JPY may retest the 162.60–162.90 area after forming a Piercing Line candlestick pattern on the daily chart following the recent pullback. A deeper correction would become more likely if the pair closes decisively below 160.50.

Key events for USD/JPY:

• Today, 14:00 (GMT+3): MBA Weekly Mortgage Applications (US)
• Today, 21:00 (GMT+3): FOMC meeting minutes
• Tomorrow, 02:50 (GMT+3): Japan Foreign Bond Investment

USD/CAD

USD/CAD continues to trade sideways within the 1.4140–1.4250 range, suggesting the market is building momentum for a potential breakout. A sustained move above 1.4250 would open the door for further gains towards 1.4300–1.4400. Conversely, a break below 1.4140 could trigger a deeper correction towards the 1.4020–1.4080 region.

Key events for USD/CAD:

• Today, 17:30 (GMT+3): US Crude Oil Inventories
• Tomorrow, 15:30 (GMT+3): US Initial Jobless Claims
• Tomorrow, 17:00 (GMT+3): US Existing Home Sales

The US dollar remains in a holding pattern ahead of the release of the FOMC minutes, which could become the key catalyst for its next move. If the document confirms that Fed officials remain concerned about persistent inflation and continue to favour a hawkish policy stance, the dollar could receive renewed support. On the other hand, a more cautious assessment of the economy and the monetary policy outlook may encourage profit-taking on long dollar positions and lead to a broader corrective move.

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