BoE and BoJ interest rate decisions coming up

The USD edged higher against its counterparts yesterday. The Fed’s as expected cut rates by 25 basis points and in tis accompanying statement, the bank highlighted the elevated uncertainty for the economic outlook. It’s interesting that every Fed policymaker was in favour of the 25 basis points rate cut except of the newly appointed by US President Trump, Stephen Miran who favored a double rate cut. In its projections, the bank signaled that two more rate cuts are to come until the end of the year and another one is to follow in 2026 and seems relatively confident for the US economic outlook. Also Fed Chairman Powell, stated that the near-term risk to inflation are on the upside. Overall, the bank seems to be in no rush to ease its monetary policy which in turn may have aided the USD and weighed on gold’s price.

Gold’s price peaked at $3710 per Troy ounce forcing us to push the R1 to meet that level, yet afterwards corrected lower. In its downward motion the precious metal’s price broke the upward trendline guiding gold’s price since the 22nd of August. Hence we temporarily switch our bullish outlook in favour of a sideways movement bias, The RSI indicator though remains at high levels implying that the market sentiment for gold’s price is still bullish. For the bullish outlook to be restored, we would require gold’s price to break the 3710 (R1) resistance line and set as the next possible target for the bulls the 3850 (R2) resistance level. Should the bears take over we may see gold’s price breaking the 3575 (S1) support line and start aiming for the 3450 (S2) support level.

North of the US border, Bank of Canada proceeded with its first rate cut since March, lowering interest rates to 2.5% if compared prior 2.75%, as was widely expected. In its accompanying statement the bank mentioned a weaker economy, less upside risk to inflation and that “disruptive effects of shifts in trade will continue to add costs even as they weigh on economic activity.” Overall we see the bank following a dovish predisposition which could allow for more rate cuts and thus we see BoC’s monetary policy intentions as weighing on the Loonie at the current stage.

Today we highlight the release of BoE’s interest rate decision which is expected to remain on hold and if actually so market attention is expected to fall on the bank’s forward guidance and any dovish signals could weigh on the pound. BoJ is also expected to remain on hold, yet the market expects BoJ to hike rates in December so some hawkishness may be required.

USD/JPY Edged higher after failing to clearly break the 146.25 (S1) support line. We intend to maintain our bias for the pair’s sideways motion to continue as long as its price action remains within the corridor set by the R1 and the S1. Also the RSI indicator remains at the reading of 50 implying an indecisive market which could allow the sideways motion to continue. For the adoption of a bullish outlook we would require USD/JPY to break the 149.15 (R1) resistance line and start aiming for the 151.20 (R2) resistance level. For a bearish outlook to emerge we would require the pair to break the 146.25 (S1) support line and start aiming for the 142.20 (S2) support level.

Other highlights for the day:

Today, on a monetary level besides BoE’s interest rate decision, we note the speeches of ECB’s President Lagarde, board members Buch and Schnabel and Vice President De Guindos. As for financial releases, we note the release of Euro Zone’s current account balance, Canada’s business barometer for September and from the US we get the weekly initial jobless claims figure and the Philly Fed Business index for September. In tomorrow’s Asian session, we get besides BoJ’s interest rate decision also Japan’s inflation metrics for August and New Zealand’s trade data for the same month.

USD/JPY Daily Chart

• Support: 146.25 (S1), 142.20 (S2), 139.60 (S3)
• Resistance: 149.15 (R1), 151.20 (R2), 154.65 (R3)

XAU/USD Daily Chart

• Support: 3675 (S1), 3575 (S2), 3450 (S3)
• Resistance: 3850 (R1), 4000 (R2), 4200 (R3)

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