Dollar Strengthens Ahead of FOMC Decision, Futures Price Near-90% Rate Hike Chance

The US dollar has retained its bid ahead of Wednesday's Federal Open Market Committee (FOMC) decision, helping USD/JPY recover from last week's selloff.

Fed hike expectations have firmed sharply, with futures pricing close to a 90% chance of a 25bp move on Wednesday, up from around 70% before Friday's CPI report.

Major banks such as Goldman Sachs, JPMorgan, HSBC, and Deutsche Bank have shifted to a September hike, further solidifying the dollar's position.

AUD/JPY is testing a major support cluster after falling over 4.6% in two weeks, raising the prospect of a near-term bounce before bears re-engage.