The Bank of England revealed its minutes for its monetary policy committee (MPC) meeting couple of weeks ago (May 7 and 8), when it decided to hold rates and maintain its asset purchase program. As expected, the MPC voted unanimously. (BoE Meeting Minutes)
The interesting piece of the minutes is that the bank sees signs that point to upward inflation pressure in the second half of the year even as inflation rates continue to decline. Earlier this week, saw annual CPI change for April at -0.1%, the first negative reading since 1960.
The GBP/USD has been retreating from a high on the year at 1.5815 to a low this week at 1.5445 before stalling ahead of the release of the minutes .
The 4H chart shows that GBP/USD was stalling at a key support at 1.5445. There is a rising trendline and the 100-period SMA there. Now after the BoE minutes, we did see a push to the upside that broke the intra-session range. The reaction made a high at 1.5558, and now, as we get into the 5/20 session, 1.5560 will be the key resistance to break in order to confirm the initial bullish reaction.
Then, the first near-term target would be the 1.57 support/resistance pivot. If GBP/USD does not climb back above 1.57, it is still likely in consolidation/bearish correction mode. Otherwise, above 1.57, the pressure will be on 1.5815, with risk of extending higher and continuing the prevailing uptrend since mid-March (from the 1.4564 low on the year).
Now a break below 1.5445 opens up the support/resistance pivots at 1.53 and the 1.51. This would neutralize the bullish outlook. A break below 1.51 would then revive a bearish outlook. But let’s stick with the bullish one first.
Looking at the current uptrend against the previous downtrend that began in the second half of 2014 ,we can see that the 50% retracement is at 1.5877. That should be the near-term upside risk. Above that the 1.60 handle should be monitored, and the bullish outlook should be limited to 1.6185, the 61.8% retracement level.
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