GBPUSD
GBPUSD trading lower in today’s trading on dollar strength and as investors get ready for the upcoming BOE rate decision. As of this writing, GBPUSD is down by almost 50 pips or 0.38% at 1.2445.
Now that the FOMC and ECB are done with their interest rate decisions, all eyes will be on the BOE. Due on Thursday, the central bank is expected to keep interest rates unchanged at 0.10%. However, analysts seem to be divided on whether or not policymakers will make adjustments to its quantitative easing program.
In March, the BOE announced in its emergency meeting that it will buy 200 billion GBP-worth of bonds. This brought the central bank’s bond purchase program to 645 billion GBP. Some analysts argue that the BOE may increase this even further to support growth which they have predicted to plunge by 35% in April to June. On the other hand, others think that BOE Governor Andrew Bailey will not announce any changes just like the Federal Reserve and the ECB stayed on the sidelines in their latest meetings.
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On the 4-hour time frame, GBPUSD can be seen testing a confluence of support. By connecting the lows of April 21, April 24, and April 29, the currency pair is currently finding support at the rising trendline. This price, around 1.2445, also coincides with the area between the 50% and 61.8% Fib levels (when you draw the Fibonacci retracement tool from the low of April 24 to the high of April 30). Lastly, GBPUSD is also trading at the 100 SMA. Reversal candlesticks at this price level could indicate a potential rally to the highs of April 30 at 1.2642.
On the other hand, if support does not hold, the currency pair could fall to its April 21 lows at 1.2255. Should this happen, a head and shoulders pattern on the daily time frame will be completed. This chart pattern is widely considered as a bearish reversal pattern and a break of the neckline support could trigger a bigger sell off to 1.1470 where GBPUSD bottomed in March.