Anticipation Builds Ahead of Key Economic Decisions (07.31.2024)

Today, the EUR/USD remains steady as traders await the Federal Reserve's policy announcement, with key support at 1.0810. Meanwhile, the USD/JPY fluctuates following the Bank of Japan's rate hike, testing the 152.00 level. Gold prices surge to $2,420 amid escalating Middle East tensions, driven by safe-haven demand. Lastly, the pound holds its ground in anticipation of decisions from both the Federal Reserve and the Bank of England, with GBP/USD watching key support at 1.2820. Stay tuned for a comprehensive breakdown of these developments and their implications for the forex market.

EUR/USD Awaits Fed Decision, First Support at 1.0810

The dollar index remained subdued around 104.4 on Wednesday as traders took a cautious approach ahead of the latest Federal Reserve policy announcement. The Fed is widely expected to keep interest rates steady on Wednesday while setting the stage for a potential rate cut in September. On Tuesday, data revealed that the number of job openings in June was little changed at 8.2 million, slightly above forecasts of 8 million. Investors are now looking forward to additional labor market data later this week, including the JOLTS report and the highly anticipated monthly jobs report. Although the pair closed flat yesterday due to these developments, today’s Fed press conference and the European inflation data are likely to bring volatility to the pair.

In the pair, the first support level is at the 200-day moving average, which is 1.0810. If this level is breached, the next supports to watch will be 1.0780 and 1.0710. On the upside, the first resistance is at 1.0840; if this level is surpassed, the next targets will be 1.0870 and 1.0900.

USD/JPY Tests 152.00 Post-BoJ Rate Hike, Eyes on 153.90 Resistance

The Japanese yen traded around 152.6 per dollar on Wednesday after experiencing sharp fluctuations earlier in the session, following the Bank of Japan's decision to raise its policy rate to 0.25%. This move confirmed market speculation as the central bank aims to normalize monetary conditions. Additionally, the BOJ announced it will reduce its monthly bond purchases to approximately 3 trillion yen starting in the first quarter of 2026. The central bank indicated that if the outlook for economic activity and prices is met, it will continue to raise the policy rate and adjust the level of monetary accommodation. The BOJ has faced ongoing pressure to increase rates due to concerns that a weak yen could contribute to rising inflation. On the data front, Japan's retail sales growth reached a four-month high in June, while industrial output declined less than expected.

After the Bank of Japan's interest rate decision, the USD/JPY pair tested the 152.00 level again. The first resistance level is at 153.90. If this level is surpassed, the next targets will be 154.70 and 155.50. On the downside, the initial support is at 152.30; if this level is breached, the next supports to watch will be 151.75 and 151.15.

Gold Surges to $2,420 as Middle East Conflict Escalates

Gold rose to around $2,420 per ounce on Wednesday, recovering from earlier losses driven by safe-haven demand amid escalating conflict fears in the Middle East. Reports indicated that Hamas leader Ismail Haniyeh was assassinated in Tehran, according to Iran’s paramilitary Revolutionary Guard. This came after the Israeli government claimed responsibility for killing Hezbollah's top commander in a Beirut airstrike on Tuesday, in retaliation for an attack on the Israel-occupied Golan Heights over the weekend.

Before the important data releases, gold remains in a sideways trend, with the first support level at 2,412. If this level is breached, the next supports to watch will be 2,390 and 2,370. On the upside, the initial resistance is at 2,430; if this level is surpassed, the next targets will be 2,445 and 2,475.

GBP/USD Awaits Fed and BoE Decisions, Key Support at 1.2820

The news flow this evening will be crucial for the pound, which has moved sideways throughout the week ahead of the Fed's interest rate decision and, more importantly, the Fed press conference. Additionally, the Bank of England's interest rate decision, set to be announced tomorrow, could influence today's movements in the currency pair. The market is pricing in a 60% chance of an interest rate cut at tomorrow's meeting, while if rates are not cut, a reduction is expected at the September meeting.

For GBP/USD, the initial support lies at 1.2820, followed by 1.2760 and 1.2730 below. On the upside, the first resistance is at 1.2890, with subsequent levels at 1.2910 and 1.2950 if the pair breaks above this resistance.