Technical outlook on EUR/USD, USD/JPY and GBP/USD [Video]

• EUR/USD holds firm ahead of crucial FOMC policy meeting
• USD/JPY faces negative risks after brief rebound; all eyes turn to BoJ rate decision
• GBP/USD targets fresh highs as BoE policy announcement looms

FOMC policy meeting → EUR/USD

The Federal Reserve will conclude its two-day policy meeting on Wednesday at 18:00 GMT, and investors are certain that interest rates will remain unchanged at 4.25-4.5% for the second consecutive meeting. After cutting borrowing costs by 1.0% in 2024, the central bank stepped to the sidelines in January, citing persistent inflation and a strong labor market.

However, renewed concerns over economic growth have emerged due to Trump’s unpredictable tariff war and ongoing political turbulence, with the US narrowly avoiding a government shutdown last Friday. A slowdown in both inflation and hiring in February was partially translated as a sign of economic weakness. With policymakers set to release updated economic and interest rate projections, Fed Chair Jerome Powell may face a tough press conference amid the Wall Street meltdown, as investors increasingly anticipate the next rate cut to arrive sooner– in June rather than September.

In the FX market, EURUSD started the week on a positive note, heading towards last week’s five-month high of 1.0946. Traders will watch whether support near 1.0865 can trigger a more sustainable bullish cycle, potentially pushing the pair above 1.0900 and toward the key psychological level of 1.1000 – once November’s resistance at 1.0935 is cleared.

However, downside risks remain. A break below the 1.0765-1.0800 support zone could open the door for a sharper decline toward 1.0620-1.0660.

BoJ policy decision → USD/JPY

The Bank of Japan (BoJ) could inject volatility into the markets during Wednesday’s Asian session, ahead of the FOMC policy decision. While investors largely expect the central bank to hold rates steady following January’s hike to 0.50%, a more hawkish stance may emerge. Rising food prices and a strong response from businesses to union wage demands have reinforced expectations of further wage growth, as indicated by the recent spring wage negotiations.

Optimism is growing that policymakers may consider another rate hike, possibly in May or July, once wage increases become evident in economic data. Additionally, the BoJ’s quarterly growth and inflation forecasts– extending to fiscal 2027 for the first time - could provide insights into future rate paths. However, US-Japan trade tensions may play a decisive role, particularly after Japan failed to secure an exemption from Trump’s universal 25% tariff on steel and aluminum.

In the meantime, USDJPY’s recent rebound has reached the upper boundary of its bearish channel and the 20-day simple moving average (SMA), flagging some caution ahead. If the bulls manage to break through the 149.25-150.00 resistance zone, the pair could gain fresh momentum. Otherwise, a downside reversal could send it back toward the 147.00 support level.

BoE policy decision→ GBP/USD

The Bank of England (BoE) is set to review its policy on Thursday, but no changes are expected following February’s rate cut to 4.5%, especially amid rising global trade uncertainty. Unlike the European Central Bank, the BoE has taken a more measured approach to monetary easing, cutting rates only twice - once per quarter- since the rate cut cycle began in August.

While January’s GDP data was weaker than expected, inflation projections have edged higher, and wage growth remains elevated at 6.0% year-over-year. This has led to speculation that interest rates may remain stable at this week’s policy meeting, likely with a 7-2 split vote, mirroring February’s decision.

Additionally, the UK’s Spring Budget Statement is scheduled for March 26 and the BoE may preferably wait for the Chancellor’s fiscal updates, which could include revisions to spending allocations, before making any policy moves.

As for GBPUSD, the pair is aiming to resume its upward trajectory above last week’s peak of 1.2987. If the bullish momentum persists, resistance could emerge near 1.3065. Conversely, a downside correction below 1.2875-1.2923 could lead the price towards 1.2765-1.2790.