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Predicted Start of Rate-Cutting Cycle and its Impact on Currency Pairs
With the expectation that the Federal Reserve will initiate the rate-cutting cycle in May, opportunities abound for savvy traders. Market consensus sees the process blazing off two months later than expected, inviting increased attention to the Federal Reserve's impending gathering. How will this influence currency pairs? Here are a few insights:
USD/JPY - Potential Rise Above 149
The Bank of Japan, at its latest gathering, chose to persist with its exceptional dovish strategy, keeping negative interest rates and regulating the government's bond yield curve. This leaves room for USD/JPY to stay on its trajectory upwards. Already, buyers have reclaimed over half their losses from the major correction last year. The local slowdown at yen 149 offers a chance to benefit if the rising trend breaks past the red line. An advantageous scenario would involve overcoming the boundary of yen 150, targeting around yen 152. However, declines below yen 147 refine the focus on possible retracement, aiming for yen 144.
GBP/USD – A Potential Surge Above Stagnant Trade Zone
Since mid-December, the GBP/USD currency pair has mainly remained latent. The exchange rate fluctuates between 1.26 and 1.28, and any breakout from this stagnancy will be indicative of where this quote heads in the short-term. The optimal condition would be an upward shift aligning with the broader market trend aiming for the key 1.31 supply zone. Pay attention to the Federal Reserve meeting this Wednesday, as the stagnation could likely continue till then.
GBP/JPY – Possibly Foreshadowing a Bull Flag Breakout
Since the start of the month, the GBP/JPY pair has seen consistent growth, showing congruity with a wider trend. At present, traders' eyes are on the flag pattern, which could catalyze the trend's continuation via a potential upbeat breakout. Demand side's chief goal is to touch the nearly six-year high of yen 196. With the Bank of England and the Bank of Japan retaining their monetary policies, one can expect the economic climate to favor the demand side.
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