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BOE rate decision preview: What to expect of GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 14, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - The GBP/USD pair has dropped to a key Fib support of 1.4372 (76.4% of Jan 2009 low-July 2014 high) ahead of the Bank of England rate decision and minutes.

    Not a super Thursday really

    The markets do not expect the Bank of England to move rates today. The minutes are expected to show the interest rate vote count remained unchanged at 8-1. Hence, it is very likely that the rate decision could turn out to be a non-event for the markets.

    The slide in oil prices and the resulting disinflation is widely known and hence commentary on inflation – likely to stay below zero in near-term – will not be a surprise as well. The able has shed 800 pips in one month as markets priced-in a sharp drop in the BOE 2016 rate hike bets. The pair is oversold on charts and hence a correction could happen even if the BOE turns out to be a non-event.

    If the vote count turns out to be 9-0, we could see the cable drop sharply to 1.4227 (May 2010 low). On the other hand, a hawkish commentary in minutes or a hawkish vote count – 7-2 – could result in a sharp rally in the GBP/USD pair to 1.45 levels. However, the possibility of a hawkish talk and/or 7-2 vote count is very low.

    GBP/USD Technical Levels

    A bounce from the key fib support of 1.4372 (76.4% of Jan 09 low-July 14 high) could see the pair test 1.4427 (hourly 50-MA). A break higher would open doors for 1.4460 (long-term trend line support), above which the pair could target 1.45 and higher levels. On the other hand, a failure to sustain above 1.4372 could bring in the psychological support at 1.43 into play. A break lower would expose 1.4281 (23.6% of life time high-low) under which the pair could target 1.4227 (May 2010 low).
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