FX traders are preparing for a very lively day on Wednesday as focus should move away from geopolitical concerns and onto fundamentals for a few sessions. There is some key data out earlier in the day, but the real attention will be on the North American trading session where we hear interest rate updates from both the Bank of Canada and the Federal Reserve Bank, and as always, the Fed should dominate market sentiment across global markets.
After the drama of last month’s meeting where the Fed closed out 2025 with another 25-basis point cut, the market is expecting this meeting conclusion to be slightly quieter with chances now up at 97% that they will keep rates on hold. Moves should come from forward guidance from the statement and press conference as projections are not declared at this meeting. Data has remained fairly stable in the US with growth remaining strong, jobs numbers still weak – although the unemployment rate dipped on the last reading – and inflation still sticky, the Core PCE still up at 2.8% well off the Fed’s desired 2%.
Some currencies are sitting at very sensitive levels going into the meeting and anything slightly off expectations could see some big moves in the market. The dollar has taken a big hit over the last few sessions and Cable looks particularly vulnerable to a topside move if we hear anything more dovish than expected from the FOMC, while anything on the hawkish side should see it drop hard back into recent ranges. Key long-term trendline resistance on the Daily chart is now relatively close at 1.3730 and a break there opens the way for a move up to the 2025 high at 1.3788, while a move south could see the 200-day moving average at 1.3413 challenged.
Resistance 2: 1.3788 – 2025 High
Resistance 1: 1.3733 – Trendline Resistance
Support 1: 1.3413 – 200 – Day Moving Average
Support 2: 1.3335 – 19 Jan Low
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