USDJPY, EURUSD, GBPUSD

·       Fed to stick to stable rates; will USDJPY move even higher?

·       EURUSD is muted below 1.0800 awaiting ECB meeting

·       GBPUSD stays calm ahead of BoE rate announcement

Fed meeting --> USDJPY

The Federal Reserve's two-day policy meeting ends on Wednesday at 18:00 GMT and it is quite likely that it will maintain its policy rate without any changes. The primary emphasis on Wednesday will be the timing of the Federal Reserve's initiation of interest rate reductions. Based on the current low inflation data, market expectations suggest that the Federal Reserve will reduce interest rates four times in the year 2024.

In FX markets, USDJPY has been stubbornly pushing for some recovery after the downfall towards a fresh four-month low of 141.57. As the pair is moving higher and failed to have a closing day beneath the 200-day simple moving average (SMA), then it may challenge the penetrated ascending lines at 146.15 and 148.60. Also, the 20- and the 50-day SMAs bearish crossover may halt any upside correction at 149.70. On the other hand, a successful drop beneath the 200-day SMA could switch the outlook to strongly bearish. 

ECB meeting --> EURUSD

The European Central Bank meets for the last time this year on Thursday and is expected to maintain the deposit rate at 4.0%. In November, inflation dropped to 2.4% y/y, a two-year low. The rapid decline in inflation has surprised even ECB policymakers. The Governing Council's tone has changed significantly, and a rate hike is no longer considered.

Technically, EURUSD is still standing beneath the 1.0800 psychological mark but it found strong support level at the 200-exponential moving average (EMA) at 1.0755. A dive beneath this line, may open the way for steeper losses until 1.0720 and the short-term uptrend line at 1.0690. A potential break of the diagonal line could take the market towards the 1.0520 support and the ten-month low of 1.0450. In the positive scenario, any moves above the 200-day SMA at 1.0825 could meet the 20-day SMA at 1.0870 and the more-than-three year high of 1.1015.  

BoE meeting --> GBPUSD

In October, the Bank of England received positive news as inflation plummeted below 5.0%. There is no anticipation of any rate changes during the BoE meeting on Thursday. However, if Governor Bailey attempts to dismiss the expectations of a rate cut by using more forceful language in the statement, the pound is unlikely to experience significant gains unless it is supported by positive data or a weaker US currency.

The rejection within the 61.8% Fibonacci retracement level of the down leg from 1.3140 to 1.2035 at 1.2720 in the preceding weeks could make GBPUSD sensitive to any cautious wording in the meeting. More losses could drive the pair until 200-day SMA at 1.2490 ahead of the 38.2% Fibonacci of 1.2460. Beneath these lines, the 50-day SMA at 1.2350 and the 23.6% Fibonacci of 1.2300 may halt bearish actions.