- EUR/USD speeds up to test 1.1100 area as debate over a bold Fed rate cut continues
- USD/JPY hits 14-month low; BoJ awaited to give direction on rate hikes
- GBP/USD shifts to the upside ahead of CPI data and BoE rate decision
FOMC rate decision: EUR/USD
The Fed will announce its rate decision on Wednesday at 18:00 GMT and the question is not if, but by how much it will cut interest rates. Investors have long been debating between a 25bps and a double 50bps rate cut, with the second option rising recently in popularity. However, Tuesday’s retail sales could still influence market sentiment as the odds remain very tight.
Expectations for a double rate cut in the US added extra fuel to EURUSD, lifting the pair as high as 1.1136 on Monday and keeping the medium-term uptrend intact. Last week, the price managed to avoid falling below 1.1000, but caution is still needed as the range of 1.1100-1.1140 poses a constraint. A decisive close above it could be necessary for a rally towards the August high of 1.1200.
BoJ rate decision: USD/JPY
After the shift from negative rates in March to a 15bps increase in July, central bankers in Japan are expected to maintain stable interest rates at 0.25%. Ever since then, the yen has gained considerable value as Japan’s monetary guidance pointed towards more rate hikes, while the rest of the world moved in the opposite direction.
USDJPY plummeted to a 14-month low of 139.56 today as monetary divergence led to the unwinding of carry trades. There might be more downside on the horizon as analysts anticipate another 10bps increase by the end of the year. If CPI inflation data surprise to the upside on Friday, staying in line with the BoJ’s forecast of 2.5%-3.0%, policymakers might signal readiness for another hike soon. In this case, USDJPY might tumble towards the 137.00-137.80 support region. A dovish tone by the Fed could add extra fuel to the sell-off.
Otherwise, a wait-and-see mode and uncertainty about the path of the economy could put the brakes on the USDJPY’s freefall, albeit temporarily. At the time being, the pair seems to be near oversold waters.
BoE rate decision: GBP/USD
The BoE’s policy decision is also on the agenda, due on Thursday at 11:00 GMT. Analysts don’t expect any changes in interest rates following August’s 25 bps reduction, but Wednesday’s CPI data could provide some clarity.
If CPI figures arrive higher-than-expected, justifying the central bank’s cautious approach over rate cuts, GBPUSD might fight the tough resistance of 1.3200-1.3265 with scope to climb to 1.3340.
Alternatively, a pullback in CPI data could intensify talks for a rate cut during the policy meeting and perhaps urge the need for a move in November, if not this week. A negative correction in GBPUSD could initially test the 1.3100 round level and then the 1.3000-1.3100 region, a break of which could mark a new lower low around 1.2890.
Forex trading and trading in other leveraged products involves a significant level of risk and is not suitable for all investors.
Recommended Content
Editors’ Picks
EUR/USD breaks below 1.1000 on stellar NFP
The buying bias in the Greenback gathers extra pace on Friday after the US economy created far more jobs than initially estimated in September, dragging EUR/USD to the area of new lows near 1.0950.
GBP/USD breaches 1.3100 after encouraging US Payrolls
The continuation of the uptrend in the US Dollar motivates GBP/USD to accelerates its losses and breaches 1.3100 the figure in the wake of the release of US NFP.
Gold rebounds from daily lows and flirts with $2,670
Following a post-NFP dip to the $2,640 region, Gold prices now embarks on an acceptable rebound and retest the area of $2,670 per ounce troy despite the marked advance in the US Dollar and rising US yields across the board.
US Payrolls surge in September, as 50bp rate cut ruled out
US payrolls data surprised on the upside in September, rising by 254k, smashing expectations of a 150k rise. The unemployment rate fell to 4.1% from 4.2%, average hourly earnings increased to a 4% YoY rate and there was a 72k upwards revision to the previous two months’ payrolls numbers.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.