BoE’s interest rate decision in focus

The BoE’s interest rate decision is set to occur later on today.The majority of market participants are anticipating the bank to remain on hold, with GBP OIS currently implying a 94.0% probability for such a scenario to materialize. As such, attention may turn to the bank’s accompanying statement, in which should policymakers imply that they may maintain the current interest rate levels for a prolonged period of time, it may provide support for the pound. However, should the accompanying statement imply that the bank may be preparing to ease its monetary policy stance, it could weigh on the pound. The US Philly Fed manufacturing index figure for June is set to be released during today’s American session. The current expectations by economists are for the figure to improve to 4.8 from 4.5 prior, implying an expansion in manufacturing activity. In such a scenario, we may see the greenback gaining support, as the manufacturing sector of the US economy appears to be resilient. On the other hand, should the figure come in lower than expected it could weigh on the USD. Over in Asia, New Zealand’s GDP rate for Q1 was released during today’s Asian session. The GDP rates on a qoq and yoy basis came in better than expected at 0.2% and 0.3% respectively, implying an expansion in economic activity in the country, which in turn provided some support for the NZD following its release.

GBP/USD appears to be moving in a sideways fashion. We maintain our neutral outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure of 50, implying a neutral market sentiment. For our sideways bias to continue, we would require the commodity to remain confined within the sideways moving channel defined by the 1.2600 (S1) support level and the 1.2760 (R1) resistance line. On the other hand, for a bearish outlook we would require a clear break below the 1.2600 (S1) support level, with the next possible target for the bears being the 1.2480 (S2) support line. Lastly, for a bullish outlook, we would require a clear break above the 1.2760 (R1) resistance line with the next possible target for the bulls being the 1.2890 (R2) resistance level.

USD/CHF appears to be moving in a downwards fashion. We opt for a bearish outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure of 30 , implying a bearish market sentiment. Moreover, we would like to note the downwards moving trendline which was incepted on the 30th of May, further aiding to our bearish outlook. For our bearish outlook to continue, we would require a break below the 0.8730 (S1) support line with the next possible target for the bears being the 0.8550 (S2) support base. On the flip side for a bullish outlook, we would require a clear break above the 0.8885 (R1) resistance line with the next possible target for the bulls being the 0.9000 (R2) resistance ceiling. Lastly, for a sideways bias we would require the pair to remain confined within the sideways moving channel, defined by the 0.8730 (S1) support line and the 0.8885 (R1) resistance line.

Other highlights for the day

Today on the monetary front we highlight the release of the interest rate decisions of Switzerland’s SNB and Norway’s Norgesbank. Also, we note that Minneapolis Fed President Kashkari and Richmond Fed President Barkin. As for financial releases, we note in the American session, the release of from the US of the current account balance for Q1, the number of building permits and housing starts, both for May, the weekly initial jobless claims figure and Philly Fed Business index for June. Oil traders may be more interested in the release of the EIA weekly crude oil inventories figure. During tomorrow’s Asian session, we get Australia’s and Japan’s preliminary PMI figures for June, while we also highlight the release of Japan’s May CPI rates.

GBP/USD Daily Chart

• Support: 1.2600 (S1), 1.2480 (S2), 1.2375 (S3)

• Resistance: 1.2760 (R1), 1.2890 (R2), 1.3000 (R3)

USD/CHF Daily Chart

• Support: 0.8730 (S1), 0.8550 (S2), 0.8335 (S3)
• Resistance: 0.8885 (R1), 0.9000 (R2), 0.9225 (R3)

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