The FOMC (Federal Open Market Committee) is a committee within the Fed and it is the principal organ for the Monetary Policy in the USA. Tonight’s FOMC session, along with the Interest Rates decision and the Monetary Policy Statement is very critical since the Fed faces the serious problem of high Inflation during the last months. Some analysts consider the inflationary issue as transitory due to low production through the lockdown in the country but some others insist that Fed should take action to keep the Consumer Price Index low. To taper or not to taper? This is the main question for the Fed tonight although there’s also a strong probability that no news will occur. As per the Interest Rates, no change is expected but there may be some notes regarding the growth predictions.

The USD Index has no obvious trend since the beginning of the week and its volatility is relatively low as well. Bond yields are moving higher and for the moment the 10-year US bond yield is at 1.49% (it opened at 1.46% at the beginning of the week).

EURUSD (current price 1.2120) is mildly bullish so far as the traders are waiting for the Fed session. The Eurozone had encouraging announcements regarding Industrial Production in April and Germany released the Harmonized Index of Consumer Prices at 2.4%, as expected. Technically wise, EURUSD met the strong support at 1.21 and turned upwards but the high volatility during the Fed can skip any supports, resistances, or other technical aspects. In the case of the Fed, mentioning a tighter Monetary Policy, EURUSD may drop to 1.2260.

GBPUSD (current price 1.4115) had an impressive bullish pullback as yesterday dropped to 1.4034. Brexit-related issues and some concerns regarding the economy reopening after the COVID-19 era pushed sterling lower. Also, the Unemployment Rate in the UK was announced at 4.7% as expected but today things changed a lot. The UK released Inflation at 2.1% in May vs expectations of 1.8% and sterling jumped up more than 30 pips rapidly because the markets anticipate that the Bank of England may tighten its Monetary Policy. Tonight’s Fed will influence the pair a lot and in case of a strong USD, we may see GBPUSD back to 1.40.

USDJPY (current price 109.90) is bullish this week but it could not retain above 110, which is a milestone price for the pair. Bond yields rise mildly and this fact helps USDJPY to move higher but Japan had strong economic results (Industrial Production in April at +15.8) so the yen is getting stronger too. Traders and investors hold their fire for the Fed session and we do not forget that on Friday there is the Interest Rates decision and the Monetary Policy Statement from the Bank of Japan as well.

USDCAD (current price at 1.2188) is rising for the second week in a row, despite the rally in oil prices. Canada released the Inflation in May at 2.8% (vs 2.4% expected) and markets may expect tighter policy by the Bank of Canada so the Canadian dollar is taking some credits. Canada will also release the Employment Change later this week but most likely, the pair will have very high volatility during the Fed session and the Press Conference. The resistance of 1.22 may be the first obstacle for a bullish movement and below the current price, there’s very hard support at 1.20 which is the pair’s lowest price of the last 6 years.