The Federal Reserve monetary policy decision on Wednesday turned-out to be a non-event as the US Dollar barely moved after the Fed announced its policy outlook. Just before the announcement USD did jolted higher against its key rival but returned to its pre-announcement levels as the Fed provided little clues about its plans for raising interest rates. On the other hand, the Bank of Japan (BoJ) on Thursday surprised markets by keeping its monetary policy stance unchanged. Against a broad expectation for additional stimulus, the central bank kept is asset purchase target at 80 Trillion Yen a year and left deposit rates unchanged at negative 0.1%.
The currency market reaction to the monetary policy announcements were muted with the GBP/USD and EUR/USD pair continue moving within a narrow trading range. The USD/JPY pair, however, witnessed a sudden drop after disappointment from BoJ.
Earlier on Wednesday, data released from UK showed that its economy registered a tepid growth of 0.4% during the first quarter of 2016. Although the reading was disappointing as compared to a quarterly growth of 0.6% recorded in the last quarter of 2015, but was still in-line with consensus estimates. Immediately after the release, the GBP/USD surged back above 1.4600 mark just to erase all of its gains to end the day in negative territory. The EUR/USD, however, maintained its steady gains, holding above 1.1300 mark for majority of the day.
Now that the major event risk is off the table, traders on Thursday will be eyeing German prelim CPI numbers and US advance GDP print for the first quarter of 2016.
Technical Outlook
GBP/USD
The pair managed to hold and rebound from a short-term ascending trend-channel support near 1.4470 level. The pair is now trading near 1.4550 level and from current levels seems likely to make a fresh attempt to reclaim 1.4600 mark. On a clear break-through 1.4610 resistance, leading to a momentum above 1.4635-40 area (38.2% Fibonacci retracement level of 1.5930-1.3835 downfall), the pair seems to aim towards surpassing 1.4700 mark and head towards testing the upper trend-line resistance of the ascending channel, currently near 1.4745-50 area.
On the downside, weakness below 1.4525-20 level might continue to be supported by the ascending trend-channel, which currently stands near 1.4500 round figure mark. A follow-up selling pressure below the trend-channel support (1.4500 mark) seems to drag the pair towards 1.4425 support level.
EUR/USD
The pair has been steadily building on to its gains above 1.1300 mark and is now comfortably trading above 1.1315 resistance (23.6% Fibonacci retracement level of 1.0830-1.1465 up-move). Hence, from current levels the pair seems to head towards retesting 1.1350-55 intermediate descending trend-line resistance, which if conquered sets the stage for further appreciation towards a very strong resistance near 1.1400 handle.
On the flip side, weakness back below 1.1320-15 resistance turned support area is likely to get extended towards 1.1300-1.1295 round figure mark. A sustained break below 1.1300 mark now seems to accelerate the fall, initially towards 1.1260 intermediate support before the pair heads towards retesting 38.2% Fibonacci retracement level support near 1.1220-15 area.
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