GBPUSD downtrend has resumed
The main event for GBPUSD this week will be Thursday’s meeting of the Bank of England’s Monetary Policy Committee. Markets are pricing in a 70% chance the nine member Committee will attempt to fill the post-Brexit economic policy void with a 25 basis point cut in the Bank rate (currently 0.50%).
While himself suggesting a rate cut was needed “during the summer”, BoE Governor Mark Carney was careful in his speech last week not to say it would happen this week and that the Committee may prefer to wait until new economic forecasts are available for the August meeting.
Carney appears before a parliamentary panel tomorrow and may offer more insights. The USD side of the cross may be influenced by the two voting members of the Federal Open Market Committee (George and Bullard) speaking today and Tuesday.
This will be the first opportunity to comment on Friday’s outsized jobs number. Friday sees the release of the June Consumer Price Index number.
A good result here, in combination with the employment report, would raise the odds of a Federal Reserve rate hike this year (currently only 25%) and boost the USD.
Management and risk description
Sterling resumed its downtrend last week and is probably declining toward my medium term objective of 1.1630 (refer to my weekly chart analysis below).
In the short term, whilst resistance at 1.2970/1.3015 contains today, looking for a sustained break below the 1.2880 support level, to trigger GBPUSD’s next sell-off toward the low 1.2700’s.
Entry: A break below 1.2880 support today would yield a selling opportunity
Stop: 1.2916, initially.
Time horizon: Allow a few days for target to be met
GBPUSD weekly chart (click to expand)
— Edited by Adam Courtenay
Non-independent investment research disclaimer applies. Read more