The pair has maintained its bearish stance, once again posting a negative close below the key 180.80 barrier. The price is currently fluctuating sideways near 179.00 as it attempts to counter the intraday positive momentum from the Stochastic indicator, increasing the chances of gathering fresh bearish momentum.
We expect that once the price successfully gathers bearish momentum, it will begin targeting the downside levels, initially moving toward 177.90, before attempting to reach further bearish targets at 177.35 and 176.70.
The expected trading range for today is between 177.90 and 179.65.
The Pound US Dollar (GBP/USD) exchange rate remained close to recent lows on Wednesday evening after the Federal Reserve raised interest rates by 25 basis points.
At the time of writing, GBP/USD was trading at around $1.3470, leaving the pairing little changed overall from earlier in the session.
US Dollar (USD) Supported as Fed Signals Further Tightening
The US Dollar (USD) held firm on Wednesday after the Federal Reserve raised its benchmark interest rate to 3.75%-4.00%.
The decision was unanimous and marked the Fed’s first interest rate increase since 2023.
With the 25-basis-point hike already heavily priced in, attention centred on the central bank’s updated projections and accompanying guidance for clues over the future path of US monetary policy.
Policymakers signalled that another quarter-point increase remains likely before the end of the year, while Fed Chair Kevin Warsh stressed that inflation remains too high and that underlying price trends have not improved sufficiently.
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Persistent inflationary pressures, elevated oil prices and relatively resilient economic data have strengthened expectations that the Fed could continue tightening monetary policy.
Warsh nevertheless continued to avoid firm forward guidance, leaving future decisions dependent on incoming inflation and labour-market data.
The relatively hawkish message helped the US Dollar retain support following the announcement.
The Pound (GBP) struggled to find a clear direction against its major counterparts on Wednesday following the release of the latest UK inflation figures.
Data from the Office for National Statistics (ONS) showed that annual headline inflation accelerated from 2.9% to 3.1% in August, matching market expectations.
The increase was largely driven by higher energy prices, which have risen sharply after briefly easing during July.
Despite this, there was limited evidence of broader inflationary pressure building elsewhere in the UK economy.
Core inflation remained unchanged at 2.6% in August, while services inflation also remained contained.
As a result, Sterling showed little reaction to the figures, with analysts suggesting the latest inflation reading is unlikely to materially alter expectations surrounding the Bank of England’s upcoming policy decision.
Near-Term GBP/USD Forecast: BoE Decision Now in Focus
Looking ahead to Thursday, attention will turn to the Bank of England’s latest interest rate announcement for the next major catalyst for the Pound to US Dollar exchange rate.
The BoE is widely expected to leave interest rates unchanged when policymakers announce their decision at midday.
With the rate decision largely anticipated, the vote split and accompanying guidance are likely to attract the most attention.
A cautious assessment of the economic outlook could weigh on Sterling if it signals limited appetite for further monetary tightening.
Conversely, stronger warnings over the inflationary impact of elevated energy prices could revive expectations for another BoE rate hike later this year and provide the Pound with some support.
Meanwhile, the latest US initial jobless claims figures could also influence the Dollar.
A renewed increase in unemployment claims may temper some of the support generated by the Fed’s hawkish policy message.
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Today, traders had a chance to take a look at the Retail Sales report for August. The report indicated that Retail Sales increased by +1.2% month-over-month, compared to analyst forecast of +0.8%.
NAHB Housing Market Index declined from 35 in August to 32 in September, compared to analyst consensus of 32. Higher interest rates put pressure on builder sentiment.
The nearest resistance level for U.S. Dollar Index is located in the 99.85 – 100.00 range. In case U.S. Dollar Index manages to settle above the 100.00 level, it will head towards the next resistance, which is located in the 100.50 – 100.65 range.
The EUR/JPY pair is quietly trying to find a bottom. With the Bank of Japan on Friday, this could be an interesting setup.
EUR/JPY
The euro has bounced a bit against the Japanese yen, as we have seen broad yen weakness over the last day or two. This pair has found the ¥178 level as a potential floor in the market, and that might be something worth watching because, quite frankly, this market has been sold off just as aggressively as all the other yen-denominated pairs.
With traders now thinking that the Japanese are going to tighten aggressively, and with intervention floating around the markets as well, it is not a huge surprise to see that we fell here. The Stochastic Oscillator says we are in oversold conditions. We are starting to turn in the other direction, but the real determinant here will be the Bank of Japan decision on Friday.
They are expected to raise rates by 25 basis points.
That in and of itself will not be the surprise. The surprise will probably come in the form of the press conference or even the statement. If they sound overly hawkish, that could be ugly for this pair and anything else denominated in yen.
But having said that, it is worth noting that the Japanese debt load is massive. It is the largest one in the developed world, and therefore higher interest rates really come at a price for the Japanese. This is a situation where they have to show markets that they are willing to defend their currency, but at the same time, they are going to have to deal with higher rates on that massive debt load. It makes the Americans look quite frugal, to be honest with you.
So, I am watching this one. I am looking for a little bit of a rise. We have seen the U.S. dollar pop up against the Japanese yen and break a little bit of structure over the last couple of days. So, we will see if this one can follow.
Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on:Pairs Of Aces Podcast,The Trader Guy, FXEmpire
EUR/USD traded at 1.1548 on the 4-hour chart after a sharp decline from the 1.1645 level. Price is below both moving averages and a descending trendline and the latest move has price trading below the 1.1554–1.1559 resistance level. This structure remains bearish despite a pause of sellers at support.
The level to watch first is 1.1556. A break above this level opens 1.1573, then 1.1589 and 1.1604. Support is found at 1.1523, but should selling pressure return, 1.1501 and 1.1484 will become more relevant.
RSI is showing an initial recovery from oversold, but still remains in the lower range, which shows the correction is likely still a correction. My view for now is slightly bearish while EUR/USD is trading below 1.1556-1.1573. A break above 1.1589 calls for a revision of this view. A break below 1.1523 argues more selling pressure should be expected to drive the price lower.
The USD/JPY pair continues to be in the headlines, as both central banks will have something to say this week.
USD/JPY
The U.S. dollar continues to rise against the Japanese yen as we see a lot of questions asked about where to go next. This makes sense that we are struggling here because, quite frankly, the Federal Reserve comes out with an interest rate decision on Wednesday and, more importantly, a press conference. The Bank of Japan will be out late Thursday in North America, early Friday in Asia, with an interest rate decision as well.
This pair will be on the minds of traders even more so than it had been recently, with the overall intervention.
The question at this point in time is not so much whether or not the Federal Reserve will hike; there is roughly a 92% possibility according to the FedWatch tool. The reality is that the short-term structure is turning bullish again, with resistance at ¥156. It is also worth noting that the stochastic oscillator is starting to cross in the oversold condition.
The technical setup, bouncing off ¥153, looks good. The question is, how does the market read both of these central banks? Therefore, it is going to be a very volatile market.
If we can clear the 156.33 level, I think at that point in time momentum will start to pick up to the upside. It does pay you at the end of every session, and if Kevin Warsh sounds more hawkish than dovish during the press conference, that pay differential may really start to be the driver again.
So ultimately, I am looking at this as a potential trade that I can add to a longer existing core position.
A lot will come down to that and, of course, whether or not the Bank of Japan looks like it is actually going to enter a tightening cycle. We are a long way from this being a negative carry for the dollar.
But we’ll see. We have a lot to think about over the next couple of days. I’ll be watching that area just above ¥156 to see if things are changing. Alternatively, if we were to break down below the ¥152 level, that would be a very bad look.
Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on:Pairs Of Aces Podcast,The Trader Guy, FXEmpire
The EURJPY pair kept providing bullish corrective trading since yesterday, benefiting from stochastic’ attempt of surpassing 50 level, recovering some losses by approaching the initial barrier at 179.10 level.
The contradiction of the main indicators might push it to provide mixed trading, the stability below the main barrier at 180.80 makes us keep the main bearish trend. Gaining negative momentum makes us expect forming bearish waves to target 178.40 and 177.35 level.
The expected trading range for today is between 178.40 and 179.65
Daily chart of the US 2-Year Treasury Yield advancing to 4.652% above the 50-day EMA. Source: TradingView
The 2-year yield continues to be very strong at the moment as we are within 24 hours or so of the Federal Reserve making an interest rate decision and having a press conference that could give us the tone for the next several weeks, if not months, of what’s going to happen with the U.S. dollar and yields.
Today, traders also had a chance to take a look at the NY Empire State Manufacturing Index report. The report showed that NY Empire State Manufacturing Index decreased from 20.6 in August to 7.6 in September, compared to analyst forecast of 14.75. The report did not have a material impact on market dynamics as traders remained focused on the upcoming Fed decision.
Currently, U.S. Dollar Index is trying to settle above the 99.50 level. In case this attempt is successful, U.S. Dollar Index will head towards the resistance at 99.85 – 100.00. On the support side, a move below the support at 99.25 – 99.40 will open the way to the test of the 50 MA at 99.08.
EUR/USD Pulls Back As ZEW Economic Sentiment Index Misses Estimates
Daily chart of the US 2-Year Treasury Yield advancing to 4.652% above the 50-day EMA. Source: TradingView
The 2-year yield continues to be very strong at the moment as we are within 24 hours or so of the Federal Reserve making an interest rate decision and having a press conference that could give us the tone for the next several weeks, if not months, of what’s going to happen with the U.S. dollar and yields.
