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GBPUSD Rocked As BoE Alters Decision To Hike Rate

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Technical analysis of Forex market

GBPUSD plummeted to a one-month low of 1.3470 yesterday, after the Bank of England’s Monetary Policy Committee (MPC) voted to continue with its existing programme of UK government bond purchases, and to keep the bank rate unchanged at 0.1%. The pair is now extending its drop past the 1.3470 low and the road to recovery for the pound is looking to be a bumpy one. The longer-term simple moving averages (SMAs) are directing lower, while the diving 50-period SMA is endorsing the growing downtrend and could boost it with a bearish crossover of the 200-period SMA.

The Ichimoku lines are indicating that bearish forces are powering up again, while the short-term oscillators are showing a preference to the downside. The MACD, below the zero threshold, is plunging further beneath its red trigger line, while the RSI is steering deeper into the oversold territory. The stochastic lines are entangled below the 20 level and are not signalling clear directional impetus yet.

If the price retains its current trajectory, prompt downside constraints could arise from the nearby 1.3411-1.3432 support section, formed by the lows around the end of September and the beginning of October. If sellers continue to dominate, they may then navigate the pair lower, turning their focus towards the 1.3337 barrier before aiming for the 1.3302 trough, achieved in December 2020.

Alternatively, if buying interest intensifies significantly, upside friction could commence from the 1.3470 mark (previous support-now-resistance) and the 1.3508 high prior to the bulls testing the 1.3531-1.3549 boundary. Recouping more ground, the price may hit the 1.3567 barrier before tackling the resistance region of 1.3587-1.3606. Recapturing the area above this could bolster upside momentum steering the price towards the zone existing between the 200- and 50-period SMAs at 1.3659 and 1.3679 respectively. Another leg higher could encourage buyers to challenge the 1.3692-1.3718 resistance border, reinforced by the Ichimoku cloud.

Summarizing, GBPUSD is exhibiting a sturdy negative bias below the 1.3500 mark. That said, for a positive tone to materialize, the price would need to return above the 1.3697 high.