The GBP/USD pair fell during the day on Wednesday, as we pulled back from the gains that we have had over the last couple of days. With that, the market looks as if today will be a huge day, and that of course makes sense considering that the Bank of England has an interest rate decision, and probably more so importantly, the interest rate statement. With that, we believe that volatility will more than likely be found. However, we recognize that we have broken down below a significant uptrend line recently, and that means that we should continue to see resistance where we once had support. We believe that the 1.55 level above will be the “ceiling” in this market, and that any rally at this point in time will have to struggle with that area. That being said though, we would also be sellers on a break down below the lows of the session on Wednesday, as the breakdown would look to continue at that point in time.
While we do not look for any rate cut, the reality is that the statement will be parsed for hints of whether or not the British will be looking to add to easing measures later, or perhaps expand some con if quantitative easing situation. We have no interest whatsoever in buying this market until we get well above the 1.55 level, and quite frankly even that will have to deal with the uptrend line. Once we get above the uptrend line, then of course we would have to recognize that the buyers are in control again. However, at this point in time it does not look like the recent bounce will stick for the longer term.
We believe that the 1.52 level will of course offer support, but could get broken down below. If we do, the market should then head to the 1.50 level. This is an area that will attract a lot of attention because it is such a large, round, psychologically significant number. With this, we believe that the sellers will take over again.