USD Braces for Fed Decision as US-Iran Geopolitical Tensions Ease

The US dollar enters a pivotal trading session as markets shift focus to the Federal Reserve's interest rate decision, with the DXY hovering near recent levels ahead of the announcement. Geopolitical developments have provided a mixed backdrop, as the US and Iran work toward finalizing the framework text and terms of a ceasefire agreement, which has tempered safe-haven demand for the greenback and the Japanese yen. The potential de-escalation in Middle East tensions could reduce risk premiums priced into oil-sensitive currencies such as USD/CAD and AUD/USD. All eyes now turn to the Fed's policy statement and updated dot plot projections, which will be critical in shaping near-term dollar direction. Traders should watch for any shifts in forward guidance regarding the pace of rate adjustments. Key USD pairs are expected to see heightened volatility around the announcement window. Near-term support for the DXY sits at recent consolidation lows, while resistance aligns with pre-announcement highs. Positioning ahead of the decision suggests markets are largely balanced, awaiting clarity on the Fed's policy trajectory.