GBPUSD is starting a downtrend on its short-term time frames, as a descending channel is forming on its 1-hour forex chart. The pair just bounced off the channel support at the 1.5100 major psychological level and might be ready to test the top at the 1.5500 mark.
The 100 SMA is below the longer-term 200 SMA, confirming that the path of least resistance is to the downside. Price seems to be testing the resistance at the mid-channel area of interest and moving averages, which typically hold as dynamic inflection points. If so, another move towards the bottom of the channel might take place sooner.
Stochastic is already indicating overbought conditions but hasn’t crossed lower yet. RSI is also in the overbought area and might be ready to head down soon, potentially indicating a return in selling pressure.
The BOE statement turned out to be less hawkish than expected, as policymakers acknowledged the downside risks to inflation and admitted that this might delay their tightening move to much later next year. Data from the UK has been mostly weaker than expected and the downturn in China could pose additional risks to the global and domestic economy.
Meanwhile, the FOMC minutes also seemed less hawkish, as policymakers expressed concerns about the spillover effects of the slowdown in China to commodity prices. Members also noted that they’d like to see further improvement in the labor market and be reasonably confident that inflation is moving closer to their 2% target in the near-term. However, recent reports from the US have also been disappointing, leading some to predict that the liftoff isn’t likely to take place until early next year.
The UK trade balance is up for release today and another weaker than expected reading might allow GBPUSD to resume its selloff. Analysts are expecting to see a smaller deficit of 10 billion GBP compared to the previous 11.1 billion GBP shortfall, possibly reflecting an improvement in export activity. The US has its import prices data lined up, along with testimonies from FOMC members Lockhart and Evans
By Kate Curtis from Trader’s Way