US dollar rebounds ahead of FOMC decision

The Japanese yen remained in a tight range in early trading as the market reflected on the latest Bank of Japan (BOJ) interest rate decision. The bank decided to leave interest and its asset purchase program unchanged. It also reiterated its inflation target of 2.0%, which is getting relatively difficult to attain. While most developed countries have inflation of more than 2%, Japan’s CPI is still below 1.0%. It maintained its policy ahead of a key election that will see the country have a new leader. Most candidates have said that they would like the BOJ to continue its policies.

The US dollar gained ground in the overnight session as the focus remained on the Federal Reserve meeting. The bank’s FOMC is expected to leave interest rates and the quantitative easing policy unchanged. At the same time, the bank will likely provide guidance about its asset repurchases program and when it will start hiking rates. The decision comes at a time when the US economy is doing relatively well. Data published on Tuesday showed that building permits and housing starts rose in August. 

US stocks erased some of the earlier gains as investors remained concerned about the Evergrande situation. The Dow Jones rose by just 30 points, down from the session high of more than 300 points. Investors are concerned about Evergrande, the second-biggest real estate company in China. After decades of expansion, the company’s debt accumulated to more than $300 billion. It has now appointed restructuring experts to map a way forward. In a statement this week, S&P Ratings said that Beijing will likely avoid bailing the company out.

EUR/USD 

The EURUSD pair resumed its downward trend in the overnight session after it formed a bearish flag pattern yesterday. The pair is trading at 1.1722, which was slightly below Tuesday’s high of 1.1750. On the three-hour chart, the pair has moved below the short and longer-term MAs and formed a bearish flag pattern. Therefore, there is a possibility that the pair will maintain a bearish trend ahead of the FOMC decision.

USD/JPY

The USDJPY pair held steady after the latest Bank of Japan interest rate decision. The pair is trading at 109.25, which is lower than this week’s high of 110.10. On the four-hour chart, the pair moved below the key support level at 109.45. It also moved between the lower and the middle line of the Bollinger Bands while the MACD and the Demarker indicator have declined. The pair will likely maintain the bearish trend.

XAU/USD

The XAUUSD pair rose to a high of 1,782 as investors moved to safe havens. This jump was higher than this week’s low of 1,682. On the four-hour chart, the pair is along the upper side of the Bollinger Bands while the Average True Range (ATR) has been in an upward trend. The Relative Strength Index (RSI) has moved from the oversold level. Therefore, the pair will likely keep rising ahead if the FOMC decision.