The Fed’s much awaited interest rate decision was to cut rates by 25 basis points as per consensus, lowering them to a target of +1.75%-+2.00%. Despite the cut, the USD strengthened against a number of its counterparts as the majority of the Fed’s policymakers seem to favor the rates remaining at the same or higher level, until the end of the year as per the new dot plot. The new Dot plot is in contrast to the market’s expectations for another possible rate cut by the end of 2019. In his press conference the Fed’s Chairman Powell, signaled a higher barfor future rate cuts, as he described the prospects for the US economy as “favourable” and the rate cut as an “insurance”. Analysts tend to note that the Fed’s decision was a hawkish cut, which could keep the USD under buying interest in the near term at least. We would also like to note that Powell’s press conference seemed to underscore that the US economy in itself may be strong, but faces outside risks and in a very subtle tone, may have implied the weakness of the US President. We expect the Fed t be data depended in the coming months as it try to measure the materialisation degree of various risks as well as their effects on the US economy, in order to decide its next moves, but overall for the time being is expected to remain on hold and could keep the USD under bidding interest. EUR/USD dropped yesterday, breaking the 1.1050 (R1) support line (now turned to resistance). We could see some correction taking place today, hence some bullish tendencies could be on the menu for the pair. Should the bulls actually assume control over the pair’s direction, we could see it breaking the 1.1050 (R1) resistance line and aim for the 1.1105 (R2) resistance level. Should the bears be in charge once again, we could see the pair dropping and breaking the 1.1000 (S1) support line, aiming for the 1.0950 (S2) support level.

BoJ keeps interest rates unchanged

The Bank of Japan decided to keep the policy balance interest rate unchanged at -0.1% as per consensus today. The bank maintained its pledge to ease policy without hesitation should there be risk of the economy losing momentum to hit its goal. BoJ also maintained its forward guidance unchanged, keeping current extremely low rates for an extended period, through Spring 2020. The bank also is to keep its asset purchases amounts unchanged and the 10 year JGB yield target at about 0.0%. The bank also issued a stronger warning about the risks threatening the economy and according to some analysts, this could be signaling a possible change of expanding stimulus. JPY seems to be supported by the decision and we could see it strengthening further during the day, however tomorrow’s inflation release could have a detrimental effect on the JPY. USD/JPY dropped during today’s Asian session aiming for the 107.75 (S1) support line. Given the forecasts for tomorrow’s inflation releases, we could see the pair rising as the JPY side could weaken. Should the pair remain under the selling interest of the market, we could see it breaking the 107.75 (S1) support line and aim for the 107.20 (S2) support level. Should the pair’s long positions be favored by the market, we could see the pair aiming if not breaking the 108.35 (R1) resistance line.

Other economic highlights today and early tomorrow

In today’s European session, we get SNB’s, Norgesbank’s and BoE’s interest rate decisions, however before the BoE interest rate decision, we expect pound traders to keep an eye out for UK’s retail sales growth rates for August. In the American session, we get the US Philly Fed Business Index for September and in tomorrow’s Asian session, we get Japans inflation rates for July.

USD/JPY H4

• Support: 107.75 (S1), 107.20 (S2), 106.60 (S3)
•Resistance: 108.35 (R1), 108.90 (R2), 109.60 (R3)

EUR/USD H4

• Support: 1.1000 (S1), 1.0950 (S2), 1.0910 (S3)
•Resistance: 1.1050 (R1), 1.1105 (R2), 1.1160 (R3)