Yesterday’s interest rate hike by the BoE does not seem to have helped the pound recover the key zone around 1.1736 – 1.1680, quite the opposite. In yesterday’s session, the pound tried to break the zone but ended the session by printing a Bearish engulfing candle, erasing the gains of the previous 2 days.
Rising interest rates in Switzerland, on the other hand, would give strength to the franc, which could reinforce the scenario discussed below.
This is a bad signal which would push the pound to test the lower levels with the first support being the 76.4% fib level. The next support levels are 1.1475 / 1.1134. When overcoming them, we watch for a reaction to the levels around parity, which are marked by a Fibonacci retracement around 123.6% (1.0672) / 138.2%(1.0386) Fibo.
A break of the descending channel to the downside is also an indication of weakness on the side of the pound.
Demarker is in neutral territory with indications of downward movement. Today’s bar has the potential to form the 1 of a sequential to start a down cycle.
Bank expectations are to hold the price around this level in Q3 and Q4 with a smooth increase in Q1.
Analysts’ expectations for Q3 are price holding around 1.16, with a potential move to 1.17/1.18 and possibility of a dip to 1.14/1.13
Weekly forecasts for a wide range between 1.17 – 1.14.
An alternative break and hold above the lost 1.1736 – 1.1680 level will encourage the bulls and an attempt to re-enter the descending channel will follow.
We place the stop loss zone above the last peak and inside the figure measured against the size of the margin account.
Dealer Anatoliy Pavlov