A breakdown of this week’s central bank commentary and the levels to watch across major USD pairs heading into next quarter.

By Leah Bryson, Senior Market Analyst
July 24, 2026 · 6 min read

The Federal Reserve’s latest commentary has shifted expectations for the path of policy rates. While officials continue to emphasize that inflation remains the primary focus, markets are increasingly sensitive to any signals that could point toward a change in the pace or timing of future rate decisions.

For currency markets, this matters because expectations around U.S. interest rates can have a direct impact on the U.S. dollar. Traders are closely watching upcoming economic data, particularly inflation and employment figures, for confirmation of the Fed’s next move.

What the Fed Actually Said

Officials reiterated that incoming inflation data will remain the primary driver of any policy shift, with particular attention paid to core services inflation, wage growth, and broader inflation trends. The current tone suggests that the Fed wants to see more evidence that inflation is moving sustainably toward its target before making significant adjustments to policy.

“We want to see more evidence that inflation is moving sustainably toward target before considering further adjustments to policy.”

This message reinforces the importance of upcoming economic releases. If inflation continues to moderate, markets could begin pricing in a more accommodative rate path. However, stronger-than-expected inflation data could keep rates higher for longer and provide additional support for the U.S. dollar.

Levels to Watch on EUR/USD and USD/JPY

EUR/USD has remained relatively sensitive to changing expectations around U.S. monetary policy. A sustained move above 1.0900 following clearer signs of disinflation could signal improving upside momentum for the euro. Traders may look toward 1.0950 and 1.1000 as potential resistance levels if the move gains strength.

On the downside, a break below 1.0800 could weaken the near-term outlook and bring 1.0700 back into focus.

For USD/JPY, the key driver remains the difference between U.S. and Japanese interest-rate expectations. A higher-for-longer Fed stance could continue to support the dollar against the yen, while a shift toward rate cuts could reduce that advantage.

Traders should also pay close attention to upcoming U.S. inflation and employment data, as these releases could significantly influence expectations for the next Fed decision.

What Traders Should Watch Next

The next phase of the dollar’s direction will likely depend less on individual Fed statements and more on whether incoming economic data confirms the central bank’s current outlook.

Key events to watch include:

• U.S. inflation data
• Core PCE inflation
• Nonfarm payrolls
• Unemployment figures
• Fed officials’ speeches
• Changes in Treasury yields
• Market expectations for future Fed rate decisions

A combination of falling inflation and weaker employment data could increase expectations for rate cuts and put downward pressure on the dollar. Conversely, persistent inflation and resilient economic growth could reinforce the case for keeping rates elevated.

Conclusion

The Federal Reserve remains data-dependent, making the next few economic releases especially important for currency markets. For traders, the key is to watch how expectations around U.S. rates evolve rather than relying on a single headline or policy statement.

EUR/USD and USD/JPY remain two of the most important pairs to monitor as markets assess whether the Fed is moving closer to a more accommodative policy stance or preparing to maintain restrictive rates for longer.

As always, traders should combine fundamental analysis with technical levels and risk-management strategies when evaluating potential opportunities.