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GBPUSD - Drops to Support at 1.30 as BOE Holds Rates Steady



GBPUSD - Drops to Support at 1.30 as BOE Holds Rates Steady
In the last week the GBPUSD has fallen sharply from an 18 month high above 1.35 back down to the current key level of 1.30 which has been significant for the last two months. Only a few weeks ago the GBPUSD broke through the resistance level at 1.30 and moved to a nine month high just above 1.32, before the surge higher to start this week. For the previous six weeks or so the GBPUSD had traded in a narrow range consolidating under resistance at 1.30, which has become a level of significance, and as expected is now offering support now that the sterling has declined.

Earlier in the range, the GBPUSD eased ever so slightly from a five month high just above 1.30 after smashing through the key 1.25 level which has resisted prices strongly for around a month. It had also received some support from 1.28 during this period of consolidation.

The 1.25 and 1.28 levels may play roles again should the sterling decline from its current highs. Prior to the surge higher to above 1.30, it had settled right around the 1.23 level after falling away from the key 1.25 level, where it met stiff resistance for nearly two weeks. Just prior to the resistance at 1.25, the GBPUSD enjoyed a strong surge higher to a one month high above 1.25, but was sold down strongly at anything above that level.

Throughout August the GBPUSD was able to consolidate and receive solid support off the 1.20 level, allowing it to stop the rot and take a breather from its drastic falls from earlier in the year when it was trading above 1.33. In late July, the GBPUSD fell heavily from 1.24, although it had been declining for several weeks after falling through the key 1.27 level.

At its final meeting for the year, the Bank of England (BOE) has held its main interest rate steady at 0.75%, voting 7-2 in favour of keeping the current level.  The BOE maintained its dovish stance with its accompanying statement: “If global growth fails to stabilize or Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected U.K. recovery.”  The central bank also revised its 4th quarter UK GDP forecast down to 0.1%.  “Household consumption has continued to grow steadily, but business investment and export orders have remained weak. Financial markets have remained sensitive to domestic policy developments,” the BOE said in a statement.  Addressing the China - United States trade war, the central bank said the “partial de-escalation of the U.S. - China trade war gives some additional support to the outlook”.  The BOE has also been tackling the uncertainty of Brexit for some time now.  BOE Governor Mark Carney will be departing the central bank at the end of January after more than seven years in the role, as British Prime Minister Boris Johnson is yet to name a successor.

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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.