Sterling drops one full figure as BOE hints negative rates
Cable fell 0.6% in immediate reaction to signals that the Bank of England announced that sub-zero rates scenario may become realistic.
The central bank kept rates and its main stimulus program unchanged with possibility of enlarging its QE by hundred billion pounds in November.
Dovish tone from BOE added to negative tone on Brexit uncertainty, which is one of pound’s drivers.
Fresh weakness emerges after three-day recovery generated bullish signal on close above rising daily cloud top (1.2944) but the action was capped by psychological 1.30 barrier.
News from BOE soured near-term sentiment, with fresh acceleration lower threatening of formation of bearish engulfing that would generate initial reversal signal and shift near-term focus lower.
Larger downtrend from 1.3482 (1 Sep high) remains intact as the recent correction was capped by key barrier, pointing to price adjustment ahead of renewed push towards key levels at 1.2730/18 (200DMA / daily cloud base).
Daily studies maintain strong bearish momentum which conflicts with rising stochastic, while daily MA’s are mixed, pointing that techs are still lacking clearer direction signal.
Res: 1.2958; 1.3000; 1.3037; 1.3053
Sup: 1.2864; 1.2814; 1.2762; 1.2730