The GBPUSD moved higher in Asian and early London trading, but after peaking near the 200 hour MA the price corrected/consolidated the gains. The correction off the low from yesterday reached the 38.2% Fibo Retracement (off just the days range it held the days midpoint).
The price is back higher and is currently testing the 200 hour MA. Look for sellers against this level as the Asian session approaches.
Tomorrow the Bank of England is expected to keep rates unchanged at 0.5% and also expected to keep their Asset Purchase Program unchanged at 325B. At the last meeting the BOE members voted 8-1 to keep the target at 325B with one dissenting vote from David Miles. Miles wanted to increase the amount of purchases to 350B. In the minutes
- It warned that further stimulus could be added if the outlook warranted it.
- Economic growth will be weak in the Long term
- Euro debt crisis remains a concern
- The CPI is expected to slow to the target of 2% by 2013
The data since the last decision showed
- A stabilization in employment with jobless claims falling by 13.7 M and the unemployment rate falling to 8.2%.
- CPI continued its downward trajectory with the rate falling to 3% and the Core rate falling to 2.1%
- Retail Sales fell by a larger than expected -2.3% (vs 0.8% expected)
- PMI Manufacturing fell to the lowest level since May 2009 at 45.9.
- Industrial Production fell by -0.3% and is down -2.6 YoY
- GDP has been down for 2 consecutive quarters (each falling by -0.3%)
Apart from employment, the data is more negative than positive, suggest risk for more stimulus. Nevertheless it would be a surprise if any change is indeed made this month.
From a technical perspective,as mentioned the price is currently testing the 200 hour MA (green line in the hourly chart). Ironically on the day of the last interest rate decision, the price tested the 200 hour MA before turning and trending lower for the rest of the month(see chart). The difference is the 200 hour MA at that time was at 1.6177. The 200 hour MA is at 1.5500 currently (617 pips lower).
Although there is still time and economic releases between now and the announcement at 7 AM ET (PMI Services and Halifx House prices), the same technicals will likely be in play at the announcement time. Look for market traders to use the 200 hour MA level to define risk and bias. If the price pushes higher above the 200 hour MA , the bias will be bullish with risk defined by the MA. If the price moves lower, the bias will be down and the MA will be resistance.
The chart above outlines the other technical levsls to watch on a move higher or lower. For trading now, look for initial support at he at 1.5478 with better support at 1.5439 (38.2% of the move up from yesterdays low to today’s high. A break below the 1.5439 should solicit additional selling momentum. On the topside a break above the 1.5500 has close resistance at the 1.5514 high for the day followed by topside trendline resistance at the 1.5532 and 1.5539.
Unlike the ECB, the BOE does not have a formal release or press conference.