Top Story

GBP/USD extends post-BoE gains despite US CPI uptick

It has been quite a volatile day in the markets, with the pound taking centre stage on the back of a hawkish Bank of England policy statement. While only two MPC members voted for a rate rise, the Bank noted that the market is under-pricing the risk of a rate rise and that the majority of MPC members see scope for some reduction in stimulus in the coming months. That is provided that the economy “continues to follow a path consistent with the prospect of continued erosion of slack and a gradual rise in underlying inflationary pressure.”

Interestingly, the US dollar failed to rally much despite news US CPI rose by 0.4% month-over-month, which lifted the year-over-year rate to 1.9%. In fact, the GBP/USD pair hit a new session high of nearly 1.34 after the release of US inflation figures, which goes to show strength of the pound’s rally. As before, we continue to expect the GBP/USD will reach 1.35 in the coming days.

But understandably, the cable does look a little overbought in the short-term so a small pullback wouldn’t come as surprise to us now. In fact, the GBP/USD has hit one of our bullish targets at just shy of 1.34. As can be seen, it has reached the 127.2% Fibonacci extension level of the last corrective swing. The 161.8% extension level comes in at 1.3565, which sits 60 pips above the next key target at 1.3500/05 area. This psychologically important level was also the low from the year 2009. Once support, it could offer some resistance.

Meanwhile on the downside, we expect the broken resistance levels to turn into support, starting with 1.3325/30 level. But any move below 1.3160 – support and today’s low – would mark the end of the current uptrend. 

Source: eSignal and FOREX.com

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account