For the British Pound, today’s key event risk was the Bank of England’s (BoE) monetary policy announcement. As many expected the banks’ Monetary Policy Committee (MPC) voted to holds the benchmark rate at 0.50%, and asset purchases at 375B pounds.
img: Bank of England governor, Mark Carney
The minutes to today’s vote will be released on August 20, and will be more revealing on whether members are moving towards or away from the 2014-rate hike. The inflation report next week (Aug. 13), will also be a key indicator for the MPC’s rate hike time-line going forward.
As we take a look at the GBP/USD, we notice a market that has been consolidating this week between 1.6809 and 1.6888. This comes after a bearish swing from the 2014-high of 1.7190. For now this bearish swing has established bearish momentum in the 4H chart (RSI dipped below 30), and has maintained it so far (RSI staying below 60). We can also see price trading below the moving averages and most importantly, under a falling trendline.
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Without any indication that the 2014 rate hike is still viable, GBP/USD should remain bearish in the short-term. If we get some near-term pullback toward 1.69 and the falling trendline, watch out for sellers, especially if the 4H RSI pushes to 60.
A break above 1.69 opens up some further bullish correction, and the last line of defense before bulls take back the market would be around 1.7060. Above that, price is likely in bullish continuation. Otherwise, GBP/USD is still in consolidation/bearish correction mode. If the 1.69, RSI@60 combination does not provide resistance, look for the next resistance to come when the RSI is above 70, especially if it provides a bearish divergence with price.
To the downside, a break below 1.68 continues putting pressure toward the 1.67, May-June lows seen in the daily chart.
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