- Summary:
- GBPUSD coils to break above the 1.30 level again as the pair finds bids on every dip. An inversed head and shoulders pattern helps the bullish thesis.
Another day, another attempt by the GBPUSD pair to break back above the 1.30 level. The round number dominated the price action recently, with cable forming multiple reversal patterns while below it.
Last week was all about the Brexit negotiations, but the closer we get to the next Bank of England’s decision, the more the focus shifts to monetary policy. The November BOE meeting will likely bring new stimulus in the form of quantitative easing. Will we also see negative rates? Unlikely, but the bank certainly prepares for that to be used in 2021 should things do not improve in the meantime.
MPC Vlieghe Signals More Stimulus
MPC Vlieghe was on the wires earlier today, highlighting the need for more stimulus in the United Kingdom. More precisely, he argued that investment indicators remain very weak and, as such, the Bank of England must consider ways to improve the policy stance.
In plain English, quantitative easing comes sooner rather than later. This is exactly what the ECB is doing for a while now – signals more quantitative easing towards the end of the year.
Yet, despite this being dovish for the two currencies, they held up pretty well. The Euro is up even against the GBP this week, more than a big figure since the trading week started. Cable also finds bids on every dip.
Therefore, the narrative shifts from QE being dovish to QE being supportive. More precisely, the two central banks’ proactiveness support the currencies.
GBPUSD Technical Analysis
To some extent, we can interpret the chart below as an inversed head and shoulders pattern. Even though the consolidation on the right shoulder exceeds the one the left, the pattern still fits the general description.
Conservative bulls may want to wait for the price to break the neckline before going long for 1.3350-1.3400 area. Aggressive bulls may be willing to go long on the price breaking the blue triangular pattern. In both cases, a stop-loss at 1.2850 invalidates the technical setup.
GBPUSD Price Forecast
