What technical levels are in play for your FX trading today

Good morning.

The Bank of England cut rate by 25 basis points to 4.75% to kickstart the US session. The vote was 8-1 vote with Catherine Mann as the only member who voted to keep rates unchanged.

Governor Andrew Bailey highlighted the ongoing progress in disinflation but noted that domestic inflationary pressures are easing at a slower pace. While most of the persistent inflation may subside quickly, pay and price-setting behaviors are gradually normalizing as the effects of global shocks continue to unwind. He stressed the importance of ensuring inflation remains near target, which means that rate cuts cannot happen too quickly or by too large a margin.

The recent Autumn Budget 2024 measures are expected to contribute to economic growth, with a provisional peak GDP boost of around 0.75% over the next year. Additionally, the budget is anticipated to raise CPI inflation by just under 0.5% at its peak. However, uncertainty around the labor market remains high, with data being difficult to interpret and wage growth surpassing typical expectations.

Governor Bailey emphasized a cautious, gradual approach to removing policy restraint. Monetary policy will need to stay restrictive for a considerable period until inflation risks ease more sustainably toward the 2% medium-term target. He also noted that the central bank would carefully monitor inflation persistence risks and determine the necessary level of restrictiveness at each policy meeting.

GBPUSD: Technically, the price moved higher earlier in the session to test the 1.2938 area to a high at 1.2946, rotated lower ahead of the decision and has moved back higher after the decision back to the 1.2938 swing target and also back to the high from earlier today.

Drilling to the hourly chart, the price has moved up to test the 100 and 200-hour MAs which come in at 1.2943 and 1.2953 respectively.

Admittedly, with the consolidation on the hourly chart over the last few weeks, a cluster of MAs are centered between 1.2943 to 1.2988. Included in that cluster is the longer term 100-day MA at 1.29883. The 200-day MA is below at 1.28134 (see green line on the chart below). The low price yesterday sniffed the MA but still fell 20 pips short at 1.2833.

EURUSD: The EURUSD moved down yesterday on the dollar buying, after the US election and fell down toward the swing lows from mid-June between 1.0665 to 1.0670.The price rebounded higher into the close but fell short of the old low from October 23 at 1.07605.

Today , the price dipped in the early Asian session, but then re-pushed higher and that has seen the pair move back up toward a swing area between 1.07605 and 1.07767.

The current price is between the swing area now. The price will need to get to – and through – that area to re-tilt the bias more in favor of the buyers at least in the short term. Move above and stay above would have traders targing 1.0810 and then the falling 100 bar MA on the 4-hour chart (that is joined by the falling 100 hour MA which is not shown on the chart below) at 1.0834 level. That target will also be a key level today and going forward.

IF resistance holds right here, that should help the sellers confidence and may lead to a run back toward the lows.

USDJPY: The USDJPY moved higher yesterday and into a swing area on the 4-hour chart (see red numbered circles on the chart below).

The high today also moved into that area but stalled right at the high from yesterday. The price has been wandering lower (see hourly chart below), and in the process entered a swing area between 153.59 and 153.88. Just below that is the broken 61.8% at 153.397. This area is a key support level in the short term. Stay above, keeps the buyers in firm control. Move below and the pair starts to move toward the converged 100/200 hour MAs at 152.88 (see blue and green lines on the chart below).

USDCHF: The USDCHF moved higher yesterday and tested a swing low going back to July 25. That move took the price through the 38.2% at 0.8698 (call it 0.8700). Those highs were retested today before moving lower. The price is now moving below the high from August 16 at 0.8742. The price has traded above and below that level over the last two hours, but is back at the lows for the day at 0.8740. Stay below, and a run toward the 0.8700 may be in the cards as the price action consolidates. Fail on the break and this is just a modest correction in a more bullish trend.

This article was written by Greg Michalowski at www.forexlive.com.