The majority of investors believe that the regulator will keep the key rate unchanged on June 14. However, according to the FedWatch Tool, more than 50% of speculators are factoring in a rate hike at the next meeting which will be held on July 26.

The US dollar is facing bearish pressure amid uncertainty over the Fed’s move on the key rate. Moreover, traders have already priced in a rate increase at least partially.

If the Fed brings the interest rate higher, the greenback is likely to start a steady rally against other currencies. These are only assumptions. In the Asian session, the US dollar was consolidating at 104.

It was fluctuating in the bearish range of 103.9–104.1. The next support level is located at 103.4 - the monthly low of June 2. The resistance level is now 104.7 - the high of May 31.

US government bond yields also stabilized early Thursday. For example, 2-year notes, which are most sensitive to changes in monetary policy, jumped yesterday.

After the unexpected rate decision of the Bank of Canada, they climbed to 4.6%. Yet, in the Asian session, they fell to 4.5%. In global markets, demand for US government bonds is declining.

The recently adopted bill to raise the debt ceiling means that the central bank will issue more bonds worth over $1 trillion. When they are issued, volatility may rise sharply.

A rise in US government bond yields usually undermines the upside potential of the yen. As a result, last night the dollar/yen pair crossed the psychologically important level of 140.

After that, the pair lost its bullish momentum and moved to a steady decline. While the greenback is stuck in the sideways channel waiting for new drivers, the yen has already advanced to 139.7. Although the pair may rebound above 140 again, it will hardly break through the resistance level of 141.

In the short term, the support level for the pair is seen at 139.5. In case of a further pullback, it will shift to 138.

A further trajectory of the pair will mainly depend on the Fed’s rate decision and the movements of the Treasury notes and the US dollar after the meeting. In the morning, the pair reacted to Japan’s economic data.

Japan's GDP for the first quarter was revised sharply higher to 2.7%. In 2023, the economy continued to recover, showing the highest pace of expansion since mid-2022. As a result, the quarterly GDP indicator grew by 0.7% compared to the previous period.

Australia also revealed crucial data. In April, the country's trade balance fell to A$11.2 billion. At the same time, imports increased, whereas exports dropped. Retail sales slid by 5% compared to the previous month. The total volume of exports to China, Australia's largest trading partner, decreased by 15.4%.

For the Australian dollar, these reports are rather negative. It was expected to go down, especially amid dropping oil prices. Despite all these factors, the aussie showed a steady increase, moving in the range of 0.6652–0.6692.

Apparently, the bullish momentum bolstered by the RBA’s rate decision and the hawkish comments of Philip Lowe is still strong. Besides, the US dollar weakened today. Despite cautious sentiment and falling commodity prices, the aussie touched 0.6688 in the morning.

The New Zealand dollar also grew today amid external factors and the consolidation of the greenback. The kiwi was steadily drifting away from the weekly low of 0.6050. At the end of the Asian session, it was trading at 0.6075.

The kiwi/dollar pair was moving in the upward range of 0.6032–0.6081. It is likely to advance higher.

00:00 Intro
00:21 Stock trading
00:41 US Fed
00:55 CME FEDWATCH TOOL
01:14 USDX
02:05 2-YEAR TREASURY NOTES
02:50 USD/JPY
03:41 JAPAN’S ANNUAL GDP
04:20 AUSTRALIA’S TRADE BALANCE
04:52 AUD/USD
05:34 NZD/USD

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