BoE decision day

The BoE’s interest rate decision is set to occur later on today, with the majority of market participants currently anticipating the bank to remain on hold at 4.5%. In particular, GBP OIS currently implies a 90.4% probability for such a scenario to materialize. Thus, our attention turns to the bank’s accompanying statement and the speech by BoE Governor Bailey following the decision. Should the minutes and the Governor’s speech showcase a willingness by the bank to remain on hold for a prolonged period of time, it may be interpreted as hawkish in nature and could thus aid the pound. On the other hand, should it be implied that the bank may cut rates in the near future, it may have the opposite effect and may weigh on the GBP. Furthermore, of interest will be how many members voted for the bank to remain on hold and how many for a rate cut, as more members than the 7 currently expected to vote for a hold, could imply that the hawk’s in the bank may be gaining further support and could thus aid the pound. On the flip side, should more members vote for a rate cut than the expected 2, it may imply that the balance of power may be shifting in the dove’s direction. Over in Asia of interest may be Japan’s February CPI rates which are set to be released in tomorrow’s Asian session. The Core CPI rate on a year-on-year basis is expected to showcase easing inflationary pressures in the Japanese economy. In turn this may increase pressure on the bank to keep interest rates steady rather than continuing on their rate hiking cycle. Such a scenario could weigh on the JPY, whereas a hotter-than-expected inflation print could increase pressure on the BOJ to continue on their rate hiking cycle which may aid the Yen.

AUD/USD appears to be moving in a downwards fashion, with the pair testing our 0.6315 (S1) support level. We opt for a bearish outlook for the pair, yet the RSI indicator below our chart currently reads a figure close to 50, implying a neutral market sentiment. Nonetheless, for our bearish outlook to continue, we would require a clear break below the 0.6315 (S1) support level with the next possible target for the bears being the 0.6230 (S2) support line. On the other hand, for a sideways bias we would require the pair to remain confined between the 0.6315 (S1) support level and the 0.6400 (R1) resistance line. Lastly, for a bullish outlook we would require a clear break above the 0.6400 (R1) resistance line with the next possible target for the bulls being the 0.6475 (R2) resistance level.

USD/JPY appears to be moving in an downwards fashion after meeting heavy resistance at the 149.15 (R1) level. We opt for a bearish outlook for the pair, yet for that to be maintained we would first require a clear break below the upwards moving trendline which was incepted on the 11th of March. Moreover, aiding our bearish outlook may be the RSI indicator below our chart which currently registers a figure close to 40 implying a bearish market sentiment. For our bearish outlook to continue we would require a clear break below the 146.50 (S1) support level with the next possible target for the bears being the 143.50 (S2) support line. On the other hand, for a sideways bias we would require the pair to remain confined between the 146.50 (S1) support level and the 149.15 (R1) resistance line. Lastly, for a bullish outlook we would require a clear break above the 149.15 (R1) resistance level, with the next possible target for the bulls being the 151.40 (R2) resistance line.

Other highlights for the day:

Today we get Germany’s producer prices rate for February, the UK’s employment data for January, followed by the US weekly initial jobless claims figure, the Philly Fed Business index for March, Canada’s producer prices rate and the US existing home sales figure both for February. In tomorrow’s Asian session we note Japan’s CPI rates for February. On a monetary level we note the interest rate decisions by the SNB, Riksbank and BoE whilst also worth mentioning the speeches by ECB member Knot, ECB Chief Economist Lane, ECB Holzmann and lastly BoC Governor Tiff Macklem

AUD/USD Daily Chart

• Support: 0.6315 (S1), 0.6230 (S2), 0.6150 (S3)
• Resistance: 0.6400 (R1), 0.6475 (R2), 0.6550 (R3)

USD/JPY Daily Chart

• Support:146.50 (S1), 143.50  (S2), 140.55 (S3)
• Resistance:  149.15 (R1), 151.40 (R2), 154.10 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

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