BoE’s and BoJ’s interest rate decisions in focus

The BoE’s interest rate decision is set to occur during today’s European session, with the majority of market participants currently expecting the bank to remain on hold. In particular, GBP OIS currently implies a 74.1% probability for such a scenario to materialize. As such attention now may turn to the bank’s accompanying statement in which should policymakers imply that the bank may cut interest rates in their next meeting, it may weigh on the pound. On the flip side, should it imply that the bank may remain on hold it could provide support for the pound.The BoJ’s interest rate decision is set to occur in tomorrow’s Asian session, with the majority of market participants currently anticipating the bank to remain on hold, with JPY OIS currently implying a 98.5% probability for such a scenario to materialize. Thus, attention may turn to the bank’s accompanying statement, in which should it be implied that the bank’s 2% inflation target is being achieved in a sustainable manner, it may aid the JPY. On the flip side, should BOJ policymakers showcase hesitance to continue hiking interest rates, it may instead weigh on the JPY.Over in the US, the FED cut interest rates by 50bp for the first time since 2020 and thus effectively beginning the Fed’s monetary easing cycle. Moreover, in the bank’s accompanying statement it appears that the 50bp cut was warranted by progress on inflation. However, in Fed Chair Powell’s press conference, it appears that policymakers are concerned about the downside risks to employment which have increased according to Fed Chair Powell. Nonetheless, some concerns do appear to be lingering in regards to a potential recession in the US economy, as we remain cautious as to why the Fed would cut by 50bp, if “economic activity has continued to expand at a solid pace”.

EUR/USD appears to be moving in a upwards fashion. We opt for a bullish outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure near 60, implying a bullish market sentiment. For our bullish outlook to continue we would require a clear break above the 1.1150  (R1) resistance line if not also the 1.1200 (R2) resistance level with the next possible target for the bulls being the 1.1250 (R3) resistance ceiling. On the flip side for a bearish outlook, we would require a clear break below the 1.1110 (S1) support level if not also the 1.1050 (S2) support line with the next possible target for the bears being the 1.0990 (S3) support base. Lastly, for a sideways bias we would require the pair to remain confined between the 1.1110 (S1) support level and the 1.1150 (R1) resistance line.

XAU/USD  appears to be moving in an upwards fashion, having formed a new all-time high figure near $2600 per troy ounce. We opt for a bullish outlook for the commodity and supporting our case is the RSI indicator below our chart which currently registers a figure above 60 which may imply a bullish market sentiment. For our bullish outlook to continue, we would require a clear break above the 2600 (R1) resistance level with the next possible target for the bulls potentially being the 2650 (R2) resistance line. On the flip side, for a bearish outlook we would require a clear break below the 2560 (S1) support line with the next possible target for the bears being the 2520 (S2) support line. Lastly, for a sideways bias we would require the precious metal to remain confined between the 2560 (S1) support level and the 2600 (R1) resistance line

Other highlights for the day

During today’s European session, besides BoE’s interest rate decision we also get from Norway, Norgesbanks’ and from Turkey CBT’s interest rate decisions. In the American session, we note the release from the US of the weekly initial jobless claims figure, September’s Philly Fed Business index and August’s Existing Home sales. During tomorrow’s Asian session, before BoJ’s interest rate decision, we get Japan’s August CPI rates and from China PBoC’s interest rate decision.

EUR/USD H4 Chart

• Support:  1.1110 (S1), 1.1050 (S2), 1.0990 (S3)
• Resistance: 1.1150 (R1), 1.1200 (R2), 1.1250 (R3)

XAU/USD Daily Chart

• Support: 2560 (S1), 2520 (S2), 2470 (S3)
• Resistance: 2600 (R1), 2650 (R2),  2700 (R3)

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