Fed releases interest rate decision

The Fed is in the epicenter of attention today as it is set to release its interest rate decision in the late American session. The bank is widely expected to remain on hold, and we may see it reiterating its doubts for extensive rate cuts given the uncertainty created by US President Trump’s import tariffs on inflationary pressures and the outlook of the US economy, as per the analysis in yesterday’s report. Should the market’s dovish expectations be contradicted by the bank, we may see the USD getting some support while on the flip side, the Fed’s interest rate decision may have a bearish effect on gold’s price and US equities markets.

Looking ahead in the FX market and staying on a monetary level, we note the release of UK’s BoE interest rate decision tomorrow in the late European session. The bank is expected to cut rates by 25 basis points and currently GBP OIS imply a probability of 90% for such a scenario to materialise. The market also seems to expect more rate cuts down the line, thus a dovish predisposition of the market is evident. Should the bank actually proceed with the rate cut as expected and signal in its forward guidance its readiness to continue cutting rates we may see the event weighing on the pound, while a possible signal for an easing of the bank’s dovish orientation could support the pound.

Cable on a fundamental level is expected to be hit by a double whammy today and tomorrow. On a technical level, the pair rose yesterday yet remained well within the boundaries set by the 1.3205 (S1) support line and the 1.3435 (R1) resistance level. We maintain our bias for the continuance of GBP/USD’s sideways motion, yet the RSI indicator remains above the reading of 50, implying a bullish predisposition of the market for the pair. For a bullish outlook though, we would require the pair’s price action to break clearly the 1.3435 (R1) resistance line clearly and start aiming for the 1.3640 (R2) resistance level. For a bearish outlook we would require the pair to break the 1.3205 (S1) line and start aiming for the 1.3010 (S2) support level.

Gold’s price rallied yesterday as India attacked Pakistan and market worries for a possible widening of the war front intensified leading to safe haven inflows for the precious metal. Yet the climate was reversed in today’s Asian session as market expectations for a possible US-Sino trade deal intensified. As per Reuters, U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet top Chinese economic official He Lifeng in Switzerland this weekend for talks. There seems to be an increasing risk on approach by market participants by the news. Should the market’s hopes for a possible trade deal between China and the US intensify further we may see it weighing on gold’s price.

Gold’s price rallied yesterday breaking the 3370 (S1) resistance line, now turned to support, yet in today’s Asian session corrected lower. The RSI indicator, despite correcting lower, is still well above the reading of 50, implying that the bullish sentiment among market participants may have eased, yet is still present. Should the bulls regain control over the precious metal’s price action, we may see it breaking the 3500 (R1) record high level, finding itself in unchartered waters with the next possible target for the bulls being set at the 3600 (R2) resistance level. Should the bears take over, we may see the precious metal’s price breaking the 3370 (S1) support line and continue lower to break the 3260 (S2) support level.

Other highlights for the day:

In today’s European session, we get Germany’s industrial output for March, Sweden’s preliminary CPI rates for April, Eurozone’s and the UK’s April Construction PMI figure and Euro Zone’s retail sales for March, while later on, we get from the Czech Republic, CNB’s interest rate decision. Later on we note the release of EIA’s weekly crude oil inventories figure and the release gains on attention after API yesterday reported a surprise drawdown in US oil inventories, implying a relative tightness of the US oil market. In tomorrow’s Asian session, we get the minutes of BoJ’s March meeting.

GBP/USD Daily Chart

• Support: 1.3205 (S1), 1.3010 (S2), 1.2805 (S3)
• Resistance: 1.3435 (R1), 1.3640 (R2), 1.3835 (R3)

XAU/USD Daily Chart

• Support: 3370 (S1), 3260 (S2), 3167 (S3)
• Resistance: 3500 (R1), 3600 (R2), 3700 (R3)

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