Dollar Steady as Fed Decision Looms, Yen and Loonie Test Key Levels

The dollar held near multi-week highs against the yen and the Canadian dollar on Monday, with traders reluctant to add fresh positions ahead of the Federal Reserve's interest-rate decision on Wednesday.

The Fed is expected to hold rates steady. The focus will be on the updated Summary of Economic Projections and Chair Jerome Powell's press conference for clues on the timing and pace of any rate cuts this year. Markets are pricing in roughly two quarter-point cuts by December, down from four at the start of the year.

[USD/JPY](/markets/soft-us-jobs-data-lower-yields-end-dollars-june-rally) traded around 160.20 after sellers pushed the pair to 159.50 last week but failed to sustain a break lower. The pair has been range-bound between 159.50 and 160.70 since mid-June. A hawkish Fed outcome could push it toward the 162.00 area, where the Bank of Japan intervened in late April. A dovish surprise would likely trigger a correction toward 158.00, traders said.

USD/CAD tested the 1.4000 level for the first time since November last week and has since consolidated between 1.3950 and 1.4020. A close above 1.4000 would open the path toward 1.4130, the next major resistance zone. A break below 1.3950 could trigger a pullback to 1.3850–1.3900, according to technical analysis.

Today's U.S. retail sales report for May, due at 8:30 a.m. ET, will provide the last major data point before the Fed decision. Economists expect a 0.3% month-over-month increase. A stronger print would reinforce the case for a hawkish hold, while a weak number could revive bets on a September cut.

The Fed announces its decision at 2:00 p.m. ET Wednesday, followed by Powell's press conference at 2:30 p.m.