Fed anxiety grips markets; currencies await Wednesday's FOMC decision

Currency markets are experiencing heightened anxiety as Wednesday's Federal Open Market Committee decision approaches, with traders reluctant to establish significant positions. The dollar remains range-bound against major currencies as uncertainty prevails over whether the Fed will signal a pause in its easing cycle. Market sentiment is dominated by concerns about persistent inflation and its impact on future rate cuts. Recent economic data has been mixed, complicating the Fed's decision-making process. Currency implied volatilities have risen sharply, indicating expectations for substantial moves following the announcement. Major pairs like EUR/USD and USD/JPY are consolidating in tight ranges, awaiting directional catalysts. The Fed's updated economic projections and dot plot will be crucial for determining dollar strength into 2025. Traders are positioning defensively, with stop-losses clustered around key technical levels across major currency pairs ahead of what could be a market-moving event.