Market Analysis: EUR/USD, GBP/USD, and USD/JPY

At the US Federal Reserve meeting, officials expectedly kept the interest rate at 5.25–5.50%. According to the head of the regulator, Jerome Powell, tightening monetary policy is still possible if indicators begin to show negative dynamics again. At the same time, the US Federal Reserve aims to implement a program of gradually reducing the rate to 2.90% by 2026. Officials also intend to begin the gradual sale of bonds from their balance sheet, which are currently being purchased in the amount of USD 95.0 billion, of which USD 60.0 billion are government bonds, and another USD 35.0 billion are mortgage debt securities.

EUR/USD

The euro fell on Thursday but recovered slightly at the start of today’s session. The US dollar weakened a day after the Federal Reserve signalled that US monetary policy would remain accommodative even longer. The Fed kept interest rates on hold Wednesday, in line with market expectations, but signalling that its officials are increasingly confident that aggressive policies can succeed in reducing inflation without crushing the economy or leading to large job losses. Along with another possible rate hike this year, the Fed’s updated forecasts show significantly tighter rates through 2024 than previously expected. The US dollar index, which measures the currency against a basket of peers, was down 0.10% at 105.33 after rising to 105.74, its highest level since March. The immediate resistance of the EUR/USD pair can be seen at 1.0663, a breakout to the upside could trigger a rise towards 1.0702. On the downside, immediate support is seen at 1.0616, a break below could take the pair towards the 1.0584 direction.

At the lows of the week, a new downward channel has formed. Now, the price has moved away from the lower border of the channel and may continue to rise.

GBP/USD

The pound fell to its lowest level since March after the Bank of England left interest rates unchanged on Thursday, ending a long series of rate hikes. The Bank of England paused long-term interest rate hikes on Thursday as the British economy slowed but said it was not taking the recent fall in inflation for granted. The Bank of England’s Monetary Policy Committee voted by a narrow 5-4 margin to keep the bank rate at 5.25%. Four members voted to increase the rate to 5.5%. The pound fell 0.41% to USD 1.2293. The nearest resistance can be seen at 1.2356, a break upward could trigger a rise to 1.2403. On the downside, immediate support is seen at 1.2245, a break below could take the pair towards 1.2221.

At the lows of the week, a new downward channel has formed. The price has moved away from the lower boundary and may continue to rise.

USD/JPY

The dollar fell against the yen on Thursday as attention remained focused on the possibility of the Japanese government intervening in currency markets to support the currency. Japan is not ruling out any options to address excessive volatility in foreign exchange markets, a top government official said on Thursday. Chief Cabinet Secretary Hirokazu Matsuno said he hoped the Bank of Japan, holding a two-day policy meeting that ends Friday, would adopt “adequate” policies to achieve its 2% inflation target.

Matsuno’s remarks echo those of top currency diplomat Masato Kanda, who told reporters on Wednesday that authorities would not rule out any options if excessive moves continue due to higher import bills and businesses that rely on imported raw materials. Strong resistance can be seen at 148.55, a break higher could trigger a rise towards 148.98. On the upside, immediate support is seen at 147.63, a break below could take the pair towards 146.22.

The previous ascending channel remains. Now, the price is in the middle of the channel and may continue to rise.