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In the kickstart video for September 16, I take a technical look at the 3 major currency pair vs the USD – the EURUSD, USDJPY and the GBPUSD.
This week, the US Fed, Bank of England and the Bank of Japan will all meet. At their last meetings the BOE cut rates by 25 basis points but it was by the smallest of margins (vote was 5-4). This month the expectations are for no change in policy as core inflation remains too high (3.5%). Focus will be in what the BOE has to say about rates going forward.
In Japan, the BOJ raised rates at its last meeting but are likely to keep rates unchanged. Focus – like the BOE decision – will be on the expecations going forward but in contrast is the BOJ tilt is for higher rates.
Finally, the Fed has a dilemma to go big or go small to kickstart its reversal lower in rates. The odds at this time last week was about 75% for a 25 bp cut. That has now reversed with the market now expecting a 65% chance for a 50 basis point cut. As a result, the USD has moved lower.
So what has the central bank policy and expectations influenced forex rates? With the Fed expectations for 50 basis points, the trend is more to the downside.
Technically, looking at the 3 major currency pairs:
- For the EURUSD, it is taking it’s technical steps higher. On Friday, it moved up to a swing area between 1.1097 and 1.11042 and found willing sellers, correcting modestly lower into the Friday close . Today, the price in the early Asian session was near the close from Friday, but started to move back higher (lower USD) toward the aforementioned swing area up to 1.11042, and ultimately through that level. The price has now moved to another swing area between 1.1131 and 1.1140, and is finding sellers on that test. It would take a move above 1.1140 to keep the momentum going. Alternatively, holding the level could see a rotation back toward the 1.1104 area once again.
- For the USDJPY, it broke below its December 2023 low at 140.248 today , and extended to a new low going back to July 2023 at 139.570. Since then, the price has moved back toward the 140.248 level and in the early US session has been able to extend above that level. If it stay above 140.248, that would give the dip buyers some hope for continued upside probing on the failed break to new 2024 lows earlier today.
- The GBPUSD has been moving higher over the last few days of trading mostly on the back of the Fed expectations for 50 basis points of cuts.. On Friday the price traded above and below a swing area between 1.3128 and 1.31447 and also its 100 bar moving average on the 4-hour chart near a 1.31435. Today, there was more certainty with those levels being broken and the price trending higher. The next target area comes between 1.3221 and 1.3230. There is some support near 1.31787 initial term technical view today.
The USD is lower overall with a big central bank week ahead. A lot is riding on the decisions from the Fed, the BOE and the BOJ and what they say abour future policy action. The technicals will help show the way.