Last week, the Fed's interest rate meeting finally resulted in the first rate hike in four years. The rate hike was in line with market expectations and was also the starting point for the rate hike cycle that the Federal Reserve had hinted about recently. Powell said after the meeting that the Fed does not have a clear roadmap for interest rate hikes at present. He said the subsequent rate hikes would depend on the US economy’s recovery pace. The Fed could continue tightening its monetary policy to provide flexibility for future monetary policy.
Investors were left wondering what comes next as Powell did not clearly explain the timetable for raising interest rates and the Fed’s upper limit for interest rates. As a result, the dollar fell from the 99 level to the 98 level and even hit a low of 97.72. The Federal Reserve did not provide a strong signal that it would continue tightening monetary policy. So, investors have to wait and see the performance of the following US inflation and economic data, from which they can predict the direction of the next interest rate meeting. Some of the economic data expected this week include the US unemployment benefits, March PMI, and the consumer sentiment index worthy of your attention.
GBP extension target at 1.3267
The USD/JPY has risen for two consecutive weeks, finally breaking the 119 mark to hit a five-and-a-half-year high. The rally was mainly due to the tightening of the interest rates in the US, which boosted the dollar versus the Bank of Japan's ultra-loose monetary policy, which made the yen weaker. From a fundamental point of view, Japan's economic growth and inflation lag behind Europe and the United States, and cases of the Japanese virus variant continues to rise, slowing its economic growth. The Bank of Japan still maintains its ultra-loose monetary policy. The policies support Japan’s economic development, which indirectly affects the yen’s upside. If the Ukrainian-Russian conflict becomes more intense, the rising risk of Russian debt default may cause global stock markets to plummet, and funds may flow to the yen as a safe-haven asset. Otherwise, it is difficult for investors to expect the yen to surge. Technically, the USD/JPY pair held the 10 and 20 moving average lines at 118.82 and 118.62 on the 4-hour chart and will look to 120.15 or 120.63 as the following targets. On the contrary, if it breaks the support or tests the 10-day line about 117.27.
For the GBP, the market will focus on the February CPl, and PPl set for release on Wednesday. On the same night, the Governor of the Bank of England will deliver a speech on the annual budget, including the bank’s orientation of monetary policy and may affect the pound’s exchange rate. Technically, the GBP/USD broke the 10-day MA line at 1.3096 and regained the previous week's high of 1.3193. If the pound extends its upward trend, the next target will be the 20-day MA line at 1.3267. If the Ukrainian-Russian peace talks achieve constructive results and ease the risk aversion, European currencies are expected to rise, and the pound/dollar pair may test the 1.3400 level and the 10 and 20-week MA lines.