Fed rate decision in focus: Technicals for three major forex pairs

The US dollar is trading in mixed territory with minimal movement as North American trading gets underway. This is hardly unexpected given that traders are gearing up for the Federal Reserve's highly anticipated rate decision later today.

The greenback is showing gains against:

• EUR: +0.04%
• GBP: +0.11%
• CAD: +0.11%

The dollar is losing ground against:

• JPY: −0.04%
• CHF: −0.02%
• AUD: −0.06%
• NZD: −0.07%

Movements remain subdued across the currency spectrum. Sterling and the Canadian dollar have seen the largest dollar gains, while the New Zealand dollar posted the biggest decline versus the USD. Still, no dominant dollar trend has emerged heading into the North American session.

The Kickstart video examines three key currency pairs—EURUSD, USDJPY and GBPUSD—from a technical perspective. For each pair, the bias is identified along with the risk-defining levels and the targets that would shift control toward buyers or sellers.

The Fed decision is today's main event

A quarter-point rate increase is widely anticipated, which would bring the federal funds target range to 3.75%–4.00%.

The Treasury market has already tightened financial conditions to some degree on the Fed's behalf. The 2-year yield stands at 4.629%, while the 10-year yield has moved both above and below the key 5.00% threshold this week. That represents a substantial shift in market interest rates.

With inflation remaining persistent and the labor market continuing to show strength, Federal Open Market Committee members have solid grounds for raising rates. In theory, higher rates should help curb inflation. The danger is that they may also slow economic growth and hiring.

The expected increase would also run counter to President Donald Trump's preference for lower rates to boost the economy.

However, since the quarter-point move is largely baked into market pricing, the rate decision itself may not drive the largest market response. Traders will instead focus on the updated economic projections and comments from Fed Chair Kevin Warsh during his press conference.

The Fed will release fresh projections covering:

• GDP growth
• Inflation
• Unemployment
• The federal funds rate

The June projections pegged the federal funds rate at 3.80% by the end of 2026. The new projections will indicate whether officials view this as a 'one and done' insurance hike or whether further tightening may be required before the year closes. Two additional meetings remain before year-end.

Do not expect Kevin to offer a detailed forward policy roadmap. He has consistently opposed providing extensive forward guidance to markets. That may leave traders to interpret his remarks, the policy statement and the updated projections on their own.

For market participants, it will not just be about what the Fed does. It will be about how markets respond.

As always, price action and the technical tools applied to it will help reveal the narrative.

US Treasury yields decline with the 10-year back under 5%

Treasury yields are slightly lower ahead of the decision but remain at elevated levels:

• 2-year: 4.629%, down 3.4 basis points
• 5-year: 4.795%, down 3.1 basis points
• 10-year: 4.971%, down 2.5 basis points
• 30-year: 5.346%, down 1.7 basis points

The 2-year yield is particularly responsive to Fed policy expectations. If Kevin emphasizes persistent inflation and leaves room for additional tightening, the 2-year yield could climb further.

The 10-year yield also carries significance after moving above and below 5.00% this week. Staying above 5.00% would maintain pressure on borrowers, businesses and equity valuations. A move back below that level would offer some relief, but more downside momentum would be required to reverse the recent rise in longer-term yields.

Middle East tensions remain elevated, but oil is falling

Middle East risks remain heightened following attacks on Saudi energy infrastructure and fresh threats from Iran-backed Houthis.

Saudi Arabia reported intercepting a Houthi drone approaching restricted airspace near Mecca, calling the incident a “red line.” The Houthis denied targeting the holy city but have threatened additional attacks. The escalation has intensified concerns about the Yanbu oil terminal, the East-West pipeline and shipping through the Red Sea and Bab el-Mandeb.

Some supply worries have eased. Saudi Arabia is reportedly offering additional crude shipments through Oman’s Sohar port, while regional oil flows have proven more resilient than feared. Unexpected increases in US crude and fuel inventories are also putting downward pressure on oil prices. Reuters

WTI crude is trading at $103.37, down $2.46 or 2.32%. Despite the decline, oil remains above $100, and geopolitical risk has not dissipated.

The trading lesson is that bullish headlines do not always lead to higher prices. Some risk may already be priced in, and oil can fall when supply routes are adjusted or immediate disruption fears subside. Price action remains the ultimate arbiter.

US stock futures point higher

US stock futures are trading higher ahead of the opening bell, with all three major indices posting solid gains:

• Dow futures: +211 points
• S&P 500 futures: +36 points
• Nasdaq 100 futures: +205 points

The Nasdaq is leading the rally as buyers return to technology stocks, while the broader gains in the Dow and S&P point to a generally positive risk environment.

Commodities and Bitcoin

Gold and silver are both trading higher despite the modest decline in Treasury yields and the mixed USD.

• WTI crude: $103.37, down $2.46 or 2.32%
• Gold: $4,350.94, up $57.77 or 1.35%
• Silver: $64.82, up $1.16 or 1.82%
• Bitcoin: $75,955, up $378 or 0.50%

Gold is benefiting from ongoing geopolitical uncertainty and some dip buying as Treasury yields ease ahead of the Fed. The post-Fed reaction will be crucial, however.

A more hawkish Fed, higher yields and a stronger USD would typically create headwinds for gold. A less hawkish Fed, lower yields and a weaker USD would be more supportive.

Bitcoin is modestly higher but remains below $76,000. Like other markets, its next directional move may hinge on the reaction in the USD, yields and overall risk sentiment following the Fed announcement.

Why today's combination matters

The Fed is navigating a challenging mix:

• Inflation remains sticky.
• The labor market remains resilient.
• Oil is still above $100.
• The 10-year yield is near 5%.
• Geopolitical risks remain elevated.

Higher oil prices can feed into headline inflation and inflation expectations. Higher Treasury yields increase borrowing costs even before the Fed acts. Together, these dynamics give policymakers reason to remain cautious about declaring victory over inflation.

The quarter-point hike may be largely priced in, but the market's reaction is not.

That is why the updated projections, Kevin's comments and—most importantly—the subsequent price action will be the focus for traders today.

Economic data ahead of the Fed

Before the Fed takes center stage this afternoon, traders will have several economic releases to digest. The main focus at 8:30 AM ET will be US retail sales and import prices.

Retail sales will offer a fresh look at consumer strength, while import prices may provide additional clues on inflation pressures. Stronger-than-expected figures—especially for the retail sales control group—could reinforce expectations that the Fed will remain restrictive.

8:30 AM ET

• Import prices MoM: +0.4% expected versus −0.4% previously
• Import prices YoY: No forecast shown; +6.0% previously
• Export prices MoM: +0.5% expected versus −1.3% previously
• Retail sales MoM: +0.8% expected versus −0.6% previously
• Retail sales excluding autos: +0.5% expected versus −0.3% previously
• Retail sales excluding gas and autos: No forecast shown; −0.2% previously
• Retail control group: +0.4% expected versus −0.4% previously
• Retail sales YoY: No forecast shown; +5.01% previously
• Canada building permits MoM: −6.4% expected versus +18.5% previously

10:00 AM ET

• US business inventories: +0.3% expected versus 0.0% previously
• Retail inventories excluding autos: No forecast shown; +0.7% previously
• NAHB Housing Market Index: 34 expected versus 35 previously

The retail control group will be especially important. It excludes several volatile categories and feeds more directly into the consumer-spending calculation used in GDP. A stronger figure would point to a resilient consumer, while a weaker number would raise additional questions about economic growth.

Still, any reaction to the morning data may be limited or short-lived. The Fed decision, updated economic projections and Kevin Warsh’s press conference remain the main event today.