The greenback struggled to find any real direction in the session, consolidating in the day’s range. USD/JPY has managed to get some traction, however, breaking intra-day highs prior to the Wall Street bell. Excluding the often phycological resistance levels in USD/JPY, the May and July resistance levels could come into focus, with offers likely stacked around this 114.37 area. The dollar has struggled against the other safe-haven however, with buyers not so eager against the franc, as Japanese geopolitical concerns seemingly have lowered the demand for the Yen.
EUR/JPY and EUR/CHF trade in a similar way, with many preferring to take short positions against the JPY. Morgan Stanley’s trade of the week is evident of this, long from 133.09. EUR/USD continues with its long-term uptrend and a recapture of 1.21 could see another leg higher if the FOMC choose to avoid a hawkish tone on Wednesday.
Sterling trade has slowed following last week’s bullish run sparked by the BoE. Much of the anticipation will be on BoE’s Carney, expected to pre-release text at 16:00 BST, with many looking out for any indications on whether the next hike will mark the commencement of a hiking cycle or a ‘one off’ move from the BoE. EUR/GBP bears will look for a hawkish aid for an attack on the 0.8745 area, with any seemingly unlikely expectation dampening from the head, a retest of 0.89 could be seen.
Cable has broken out of the post Brexit range, and trades back within these levels, however, a dovish tone from Carney could see GBP/USD trade back within these levels.
BoE Governor Carney says any prospective increases in the Bank Rate would be expected to be at a gradual pace and to a limited extent and to be consistent with monetary policy continuing to provide substantial support to the economy
– Repeats views that some withdrawal of stimulus is likely to be appropriate over the coming months.
– In the UKK, large exchange rate moves create price dynamics that are relevant to the policy horizon.
– There remain considerable risks to the UK outlook related to the process of EU withdrawal; MPC will respond to the developments as they occur insofar as they affect the behaviour of households and businesses and the outlook for inflation.
– UK growth looks set to remain weaker than G7 average until mid-2008.
– Remaining spare capacity is being absorbed a little more rapidly than expected; inflation likely to overshoot to overshoot 2% over next three years.
– The bar for changing monetary policy frameworks (e.g. inflation targeting) should be very high.
– Equilibrium rates can be expected to settle at levels significantly below pre-crisis levels.
News source: www.talking-forex.com