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GBPUSD - Enjoys Strong Support from 1.30 as BOE Holds Rates



GBPUSD - Enjoys Strong Support from 1.30 as BOE Holds Rates
In the last few weeks or so the GBPUSD has enjoyed some solid support from the key support level of 1.30 which has allowed it to push higher and reach a two week high above 1.31 last week and again push off strongly to finish this week. In the last few weeks the 1.30 level has been under pressure as the GBPUSD eased away from a two week high above 1.32 and looked poised to move lower through 1.30 before some support kicked in which has held it up well.

It has shown some more volatility of late when it surged higher to its highest level in more than 18 months above 1.35 before falling sharply back down to the current key level of 1.30 which has been significant for the last three months. If it continues to rally higher off the support at 1.30, it may face potential resistance around 1.3250 and the 18 month high around 1.35.

The 1.30 level again remains key and will be closely watched to see if the support holds up or the sterling returns below and meets resistance at that level again. In early December, 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 above 1.35. For the prior 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.

The Bank of England (BOE) have voted 7-2 to keep the official base rate at 0.75%, in what will be Governor Mark Carney’s final monetary policy meeting, and the final meeting before the United Kingdom departs the European Union later today.  Some thought the BOE may cut rates given recent weak GDP figures.  European and British leaders are now due to start negotiations for a free trade agreement before the end of 2020.  The BOE’s report further downgraded the 2019 fourth-quarter U.K. GDP growth estimate to zero. The central bank have suggested that as the Brexit outcome becomes clearer, inflation and growth are likely to pick up.  “Monetary policy will be set to ensure a sustainable return of inflation to the 2% target.  Policy may need to reinforce the expected recovery in U.K. GDP growth should the more positive signals from recent indicators of global and domestic activity not be sustained or should indicators of domestic prices remain relatively weak,” the BOE’s Monetary Policy Report said.  It had also been widely accepted that if there is a Brexit deal done by the 31st January, the central bank will keep rates at 0.75% for the time being.

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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.