GBPUSD

Bank of England to retain the same policy stance

Q2 data could be more valuable for next decision making

What happened last time

In its February policy meeting, the Bank of England (BoE) emulated the Federal Reserve by exploring rate cuts, ultimately deciding to maintain interest rates at 5.25%, their highest level in 16 years, with a 6-3 majority vote. Two policymakers voted for a rate hike but surprisingly, one policymaker raised his hand for a quarter-percentage point rate cut for the first time since the pandemic. On top of this, the central bank removed the sentence that referred to further tightening, adding to speculation that the rate hike cycle was now in the past and a new chapter of rate cuts would open in the coming months.

However, the central bank provided no clues about the timing of rate cuts, reiterating in the policy statement that more evidence is needed to confirm inflation is moving sustainably towards its 2.0% target. This narrative might be repeated once again when the central bank reviews its policy on Thursday. UK inflation stabilized at 4.0% y/y in January but given the recent upside surprises in the eurozone and the US CPI data, a meaningful pullback to 3.5% as analysts expect, is questionable. Besides, with the economy moving out of a mild technical recession in January on the back of growing consumption and construction, policymakers might avoid any premature rate cut signals.

GBP/USD levels to watch

At present, GBPUSD is seeking support around the 1.2680 region following its pullback from an eight-month high of 1.2892. A close below that floor would downgrade the short-term outlook back to neutral, consequently causing a slump towards its 200-day simple moving average (SMA) at 1.2590.

On the upside, the bulls will have to crawl back above the 20-day SMA at 1.2730 in order to reach the 1.2800 round level. A move higher and above the 1.2855-1.2900 wall could see an advance towards the 1.3000 psychological level.

BUY GBPUSD 12650 exit 12755

SELL GBPUSD 12767 exit 12644

GOLD

Gold price (XAU/USD) attracts some sellers on Tuesday and stalls the previous day’s modest bounce from the $2,145 zone, or over a one-week low. The stronger US inflation figures released last week fuelled speculations that the Federal Reserve (Fed) will stick to its higher-for-longer interest rates narrative and also modify its forward guidance to two 25 basis points rate cuts in 2024 instead of the three projected previously. This remains supportive of elevated US Treasury bond yields and lifts the US Dollar (USD) to a nearly two-week high, which, in turn, is seen undermining the non-yielding yellow metal.

That said, the markets are still expecting the Fed to start the rate-cutting cycle as early as the June policy meeting. This, along with persistent geopolitical tensions stemming from the protracted Russia-Ukraine war and conflicts in the Middle East, could offer some support to the safe-haven Gold price and help limit losses. Traders might also prefer to wait for more cues about the Fed’s rate-cut path before placing fresh directional bets around the XAU/USD. Hence, the focus remains on the crucial FOMC decision on Wednesday, which will drive the USD demand and provide a fresh impetus to the precious metal.

BUY GOLD 2140 exit 2159

SELL GOLD 2164 exit 2140

USDJPY

USDJPY was sharply higher (up almost 1%) after BOJ’s major shift, though the message from the central bank was seen as dovish on signals that future policy tightening will be moderate, which will keep the big rate gap between the Fed and BoJ and favor the dollar.

Fresh acceleration extends recovery leg from 146.48 higher base (where a bear-trap has also formed) and returned above psychological 150 level.

Almost full retracement of 150.88/146.48 correction adds to bullish bias, with close above 150 to reinforce bullish structure for attack at 150.88 (2024 high), violation of which to expose multi-decade highs at 151.90/94.

Intraday bias in USD/JPY remains on the upside for the moment. Firm break of 150.87/89 resistance will confirm larger up trend resumption. Next near term target will be 61.8% projection of 140.25 to 150.87 from 146.47 at 153.03. On the downside, below 148.90 minor support will delay the bullish case and turn intraday bias neutral first. But outlook will now remain bullish as long as 146.47 support holds. Im super bullish on Dollar vs JPY. Thus, keep selling JPY and buy USD on each and every dip

Markets shift focus towards FOMC meeting on Wednesday, to get more signals about Fed’s next steps, as June rate cut is widely expected. Again keep buying USD vs JPY on all kinds of dips. Japanese Yen is goin weaker.

Res: 150.88; 151.43; 151.90; 151.94.

Sup: 150.00; 149.37; 148.92; 148.35.

BUY USDJPY 15048 exit 15166

SELL USDJPY 15190 exit 15000 or even 14900

Please dont forget the stoplosses on each and every trade.