The greenback is on the offensive against major rivals on Wednesday despite the prevailing risk-on sentiment in the global financial markets amid some signs pointing to China tariff delay. Traders are fairly optimistic about the ongoing Federal Reserve policy meeting that concludes later today.
The US central bank is widely expected to deliver a non-dovish message on the economy and the outlook for its monetary policy, which would be dollar-positive. The Fed may point to the economic conditions that don’t warrant additional stimulus at this stage. As a reminder, last week’s employment data impressed the markets as the US economy created 266,000 jobs, exceeding the 180,000 estimate. Moreover, wages growth was decent and services sector remained strong last month. Against this backdrop, Powell may confirm that the regulator won’t rush to adjust its interest rates unless economic conditions materially change.
In this scenario, EURUSD could extend the retreat from local highs around 1.11 and get back below the 100-DMA which lies around 1.1060. At that, demand for gold could wane quickly, sending the bullion to the $1,458 area and lower. USDJPY will likely regain the 200-DMA around 108.80 and retarget the 1.11 handle. Also, the US CPI report could affect USD crosses in the near term. Weak numbers may temper local demand for the US currency.