GBPUSD – BoE in focus; hawkish stance could inflate pound for retest of 1.40 while softer tone would risk fall below 1.38
Cable was slightly higher during Asian trading on Thursday, but gains were so far unable to clearly break above 1.3900 barrier (broken 50% of 1.3457/1.4344 / daily Kijun-sen).
Wednesday close in red and below 1.39 handle was negative signal, however, dips remain for now limited by pivotal support at 1.3841 (Fibo 38.2% of 1.3026/1.4344, Oct-Jan rally, reinforced by rising 30SMA).
Another strong support lies just below, at 1.3796 (Fibo 61.8% of 1.3457/1.4344 rally) and sustained break below 1.3841/1.3796 pivots will generate strong bearish signal.
Bearishly aligned daily studies weigh, but oversold slow stochastic signals that bears may hesitate ahead of renewed attempts lower.
Falling thick hourly cloud (spanned between 1.3936/93) marks strong barrier above initial 1.3900 hurdle and continues to weigh on near-term action.
BoE’s interest rate decision and release of inflation report are key events for sterling today. The central bank is expected to keep interest rates unchanged at 0.50% on today’s meeting, but hawkish tone could be expected. Traders expect the BoE to signal another interest rate increase in coming months and will look for voting results from the previous meeting, which could generate positive signal if any of nine MPC members voted for rate hike.
Positive signals would increase likelihood of rate hike in BoE’s next policy meeting in May.
Hawkish stance from BoE could inflate the pound for retest of important 1.40 barrier (psychological resistance / broken Fibo 38.2% of 1.3457/1.4344) and could generate stronger bullish signal on firm break higher.
Conversely, softer tone from the central bank would increase pressure on pound for extension of pullback from 1.4344 (25 Jan peak / the highest level since Brexit vote).
Res: 1.3900; 1.3936; 1.4000; 1.4056
Sup: 1.3841; 1.3796; 1.3741; 1.3724