Market participants are approaching the end of the year with caution due to the upcoming Federal Reserve (Fed) meeting, followed closely by the Bank of Japan (BoJ) meeting. These meetings highlight the significant role that central bank policies play in shaping market dynamics and investor sentiment.
It is expected that the Fed will implement a 25 basis point rate cut to gradually bring rates back to a neutral level. Despite expectations of a less hawkish Fed, the US dollar has remained resilient. Technical analysis suggests that the US dollar's conditions have returned to a more neutral stance, with potential for stabilization.
In the eurozone, the recent European Central Bank (ECB) meeting had little impact, but signs of improvement in services activity have provided stability to the EUR/USD pair. The pair is currently forming a minor inverse head-and-shoulders pattern, but confirmation depends on a breakout above a specific level.
The Japanese yen has faced pressure due to diminished expectations for a rate hike from the BoJ. USD/JPY remains within a rising channel, with upward momentum gaining traction. However, a downward trendline resistance could pose challenges.
The outcomes of the Fed and BoJ meetings are likely to have significant implications for currency markets and investor strategies as the year comes to a close.