The Bank of England (BoE) released its meeting minutes for the latest monetary policy vote, which was to hold rates and maintain the size of the asset purchase program. Following the release, the GBP/USD tested the 2014-low at 1.5591 and rebounded after minor breach.
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The Double Bottom Attempt:
The 1H chart shows this sharp rebound after a couple days spent drifting in low volatility. Price crossed the 100-, and 50-hour simple moving averages and the RSI pushed well above 60, show loss of bearish bias and momentum. We can also clearly see a double bottom attempt after the second failure to break down 1.5590.
BoE Minutes and Rationale for Reaction:
The BoE minutes revealed a vote of 7-2 during its Nov. 5-6 meeting, with Ian McCafferty and Martin Weale voting for a rate hike for the fourth time in a row. (official release). The most likely reason the market reacted with pound-buying is that the recent BoE Quarterly Inflation Report showed lower growth and inflation projections, and there was a possibility that the 2 members are considering holding off a rate hike. Because this was not the case, the minutes were not as dovish as some expectations.
Assessing the Double Bottom Attempt:
The GBP/USD is now testing 1.57 as we enter the 11/19 US session. US traders might have to deal with how to react to the GBP/USD as it approaches the 1.5735 high. If the market holds at 1.5735, it is not yet a completed double bottom, but simple a range. Then, if price falls back below 1.5650, we still have the bearish outlook. However, if subsequent dips hold above 1.5650, preferably above 1.5670, we would be building bullish bias, with more likelihood of a pending double bottom.
The potential double bottom would be about 145 pips wide. A break above 1.5735 opens up 145 pips higher, putting the 1.5880-1.59 area in sight. A break below 1.5590 opens up 1.5445.
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There are a few technical be notes from the 4H chart.
1) We can expect some sellers at 1.5790-1.5820 area (around 1.58), which contains a couple of previous support pivots as well as a falling speedline from late October’s high at 1.5182.
2) If price comes up to 1.59, a falling trendline from July (2014-high), might come in play.
3) We should also anticipate sellers if the 4H RSI comes up to 60 and stalls.
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