Nevertheless, if Fed intends to move rates in June, then the telegraphing process has to begin now and thus a hint could be given through April statement. The probability of a rate hike today is close to zero.
Thus, we have two main scenarios -
* Fed keeps dovish bias and stays silent regarding timing of next rate hike
* Fed hints at a June rate hike
Scenario – I – GBP/USD could test 1.47 levels
GBP is on the front foot as recent polls showed a shift in favor of EU membership. Plus, a sharp rise in ‘undecided’ category is seen shifting to “in” vote ahead as people usually prefer status quo (‘in’ vote) when the consequences of a change are unclear.
Hence, GBP shorts are being squared off. The bird is trading around 1.4580 after having clocked a high of 1.4639 levels in Tuesday’s NY session.
* Dovish Fed could help the pair test offers around 1.47 levels.
* Moreover, the pair may witness day end closing above 1.4680 (falling ), which would add credence to the recent move and signal trend reversal on larger scheme of things.
Other key gainers could be –
Gold – may challenge offers around $1270-1280 levels
EUR/USD – could revisit 1.1376-1.14 handle
Scenario – II – One half of a recipe for further USD/JPY rally
Speculation that BOJ may introduce negative rates on loans, tweak on Thursday led to a sell-off in Yen and a rise in USD/JPY to 111.88 levels. The bird currently trades around 111.20 levels. Whether or not BOJ under delivers or over delivers remains to be seen. However, action in the pair also depends on Fed stance.
- Hint at June rate hike could help USD/JPY break above 50-DMA ahead of BOJ rate decision
- Moreover, above 50-DMA, the channel resistance around 112.80 stands exposed
- The dirty work of taking the pair over and above 112.80 then depends on BOJ
Other key losers could be –
Gold – may finally see head and shoulder breakout (neckline around $1220), although mid-term invalidation is seen only below $1190 levels
EUR/USD – the bird has had a tough time extending/sustaining gains above 1.13 off late and thus may see a quick fire drop to 1.12 levels
NZD/USD – 0.6981 is a strong resistance that has capped recovery from Friday’s low of 0.6835. June rate hike hint could see spot drift lower to 50-DMA at 0.6779