Two trades to watch: EUR/GBP, USD/JPY

Fiona Cincotta
By :  ,  Market Analyst

EUR/GBP falls ahead of BoE rate decision

EUR/GBP is falling for a third straight session day as attention turns to the BoE.

The BoE is expected to raise interest rates by 25 basis points taking the rate to 0.75%, which was last seen before the pandemic started. This would mark a hat-trick of rate hikes.

Yet with inflation expected to rise further and growth slow amid the fallout from the Ukraine crisis, will the BoE look towards a dovish rate hike or a hawkish hike? This could be a tricky balancing act for the central bank.

The market is currently pricing for interest rates to reach 2% by the end of the year.

Learn more about what to expect from the BoE

Where next for EUR/GBP?

EUR/GBP extended its rebound from 0.82 the 2022 low before running into resistance at 0.8455 on March 15. The pair trades caught between the 200 SMA limiting the losses around 0.8360 and the upper band of the multi-month falling channel on the upper side around 0.8430.

The crossover of the 50 sma above the 200 SMA is a bullish signal, which combined with the long lower wick on the candle suggests that the buyer could start pushing the price higher. However, the bearish MACD continues to give the sellers hope of further downside.

Sellers will look for a move below 0.8325, the crossover of the 50 & 100 sma, which could prove a tough nut to crack. Beyond here 0.8310, the 9th March low could come into focus. Buyers will look for a move over 0.84 ahead of 0.8440, the falling trendline resistance.

eurgbp chart


USD/JPY rises post-Fed, ahead of BoJ

USD/JPY is rising for a ninth straight session in cautiously optimistic trade.

The yen is falling on safe-haven outflows amid progress in peace talks with Russia and Ukraine and on central bank divergence after the Fed hikes rates. The BoJ is due to announce its interest rate decision overnight and is expected to stick to its accommodative stance.

The US dollar is rising versus the Japanese yen after the Fed hikes rates, as expected by 25 basis points to 0.5%. The Fed’s dot plot points to 6 more rate hikes across the year, in line with the market’s expectations.

US jobless claims are due later but are unlikely to be market-moving given yesterday's Fed meeting.

Where next for USD/JPY?

USD/JPY is on the rise for a 9th straight session. The pair has eased back slightly from the six-year high at 119.12.

The pair continues to trade in a two-day rising channel, and the RSI is well into overbought territory so that a sell-off could be on the cards before any move higher.

Sellers will be looking for a move below 118.45 to negate the near-term uptrend and for more downside towards 117.75, the March 15 low. A move below here could bring a lower low, changing the bias to bearish.

Buyers will be looking for a move above 119.12, the recent six-year high ahead 119.70, the upper band to the rising channel, and a 120.00 round number.

usdjpy chart

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Related tags: Forex BOE BoJ Fed EUR GBP USD/JPY

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