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Technical outlook on USD/JPY, GBP/USD, AUD/USD [Video]

  • AUD/USD tests critical levels as first RBA rate cut in four years is expected
  • USD/JPY tumbles after strong Japanese GDP; Fed and geopolitics eyed next
  • GBP/USD aims for bullish continuation as UK employment and CPI awaited

RBA policy meeting --> AUD/USD

The Reserve Bank of Australia is wrapping up its two-day policy meeting on Tuesday. Traders are optimistic that the central bank will deliver a 25bps rate cut to 4.1%, marking the first reduction in four years. With inflation sharply cooling to 2.4% y/y in Q4 - near the midpoint of the RBA’s 2-3% target range - and the economy losing momentum, a rate cut seems likely. But the big question is whether this will be the start of a series of cuts or a one-off move for now.

In the FX market, AUDUSD is looking ready for an upward trend reversal after breaking above the 0.6300 level. The positive crossover between the 20- and 50-day SMAs adds weight to the bullish narrative. However, keep an eye on the 0.6400-0.6445 zone - a tough test could come here. A dip back below 0.6285 would shift the focus to the 0.6230 support, with further downside potential likely bringing the 0.6130-0.6100 area next into view. 

Fed meeting Minutes --> USD/JPY

The Fed minutes from January’s meeting hit the wires Wednesday, but traders aren’t expecting fireworks. The Fed is in a "wait-and-see" mode, keeping a close eye on inflation data, and the market's focus is more on future rate cuts than immediate moves. The minutes likely won’t shift the US dollar much unless they convince traders that a second rate reduction is necessary by the end of the year. Note that futures markets are currently pricing in 40bps of monetary easing versus the Fed’s 50bps for 2025.

Several Fed speakers will be commenting on monetary policy throughout the week, while headlines on the geopolitical front could move safe-haven assets, including the greenback, as the US administration is pushing for peace deals in Ukraine and Gaza.  

In the meantime, USDJPY is facing renewed downside pressure after stronger-than-expected Japanese GDP growth readings. Despite Japan’s yen often staying muted in response to domestic data, this surprise boost suggested there might be more rate hikes on the table. If this hawkish narrative gains traction, the pair could extend its downtrend to 149.00-149.50 once the 151.85 support is broken.

UK CPI & employment data --> GBP/USD

Meanwhile in the UK, employment and inflation figures could drive volatility in the British pound. With US inflation and wage growth surging recently, a similar print in the UK would likely push back expectations for a rate cut, giving the pound a potential boost. Average hourly earnings for the three months to December could surge to 5.9% y/y. On top of that, headline CPI could advance to 2.8% y/y, with core CPI jumping to 3.7% y/y, adding extra fuel to the rally.

If the data surprises to the upside, GBPUSD could rip higher toward the 1.2765-1.2800 range. However, if the numbers disappoint, and the unemployment rate edges higher, the BoE could reignite discussions around further rate cuts, possibly in March. In this case, GBPUSD could tumble to 1.2400-1.2455, with the 1.2350 zone in play if the bearish pressure intensifies.

Author

Christina Parthenidou

Christina joined Trading Point in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics.

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