Sterling was lifted by dovish Fed, BoE in focus for fresh signals

Cable kept positive tone in early Thursday, following previous day’s post-Fed jump and retested pivotal 1.40 barrier which repeatedly capped recovery attempts last week, but so far without break higher.

As expected, the Fed was upbeat in its economic projections, expecting the strongest growth in nearly 40 years and inflation jump in 2021, as vaccination in the US is speeding up and a number of new infections is decreasing, while the last stimulus package is going to boost recovery, however, the central bank remained dovish on keeping the current monetary policy unchanged for extended period of time that deflated dollar.

Investors shift focus to today’s Bank of England monetary policy meeting, with wide expectations that the central bank is going to keep its huge, crisis-fighting stimulus program.
The signs that introducing sub-zero rate has been removed from the agenda, boosted the sentiment but the BoE is expected to temper the expectations that the economy is heading for a strong recovery on accelerating vaccination, as optimism about recovery prevails but with a large dose of caution due to the third lockdown and fears of new variants of Covid-19.

Traders will try to learn more about the central bank’s confidence about the economic recovery over Europe’s fastest rate of vaccination and more spending and tax cuts.
Sterling may advance further if BoE expresses stronger than expected optimism today.

Daily studies turned to bullish setup and gain positive momentum, with Tuesday’s hammer and Wednesday’s rally point to reversal.
Firm break of 1.40 barrier (also 50% retracement of 1.4238/1.3778 pullback) is crucial for fresh bulls, as this would signal an end of corrective phase from 1.4238 peak and confirm a higher low at 1.3778.
Break higher would open way towards Fibo barriers at 1.4042 and 1.4129 (61.8% and 76.4% of 1.4238/1.3778 respectively).
Caution on repeated failure to clear 1.40 pivot that would signal extended sideways mode and keep the downside vulnerable, with extension below a cluster of daily MA’s in 1.3958/19 zone (20/30/10DMA) to weaken near-term structure.

Res: 1.4000; 1.4062; 1.4100; 1.4129
Sup: 1.3934; 1.3917; 1.3886; 1.3850