GBPUSD – 1.24 on focus before BOE

GBPUSD ahead of tomorrow’s BOE rate decision :

• a breakout of a corrective flag formation confirms the current short trend
• Strong price action to end the corrective movement
• Test and retracement of 50 fibo with long spike Kendall confirmed by second Kendall smaller tail from above
• Failed attempt to break 200 MA and 50 MA
• Test and reversal of the diagonal resistance
• Break and return below 38.2 fibo and horizontal support

I expect the downside move in today’s session to head towards 1.24

A weaker USD and risk-on sentiment helped GBP somewhat in the previous sessions, but we are now seeing defensive positioning. Tomorrow we have the BOE interest rate decision, with the central bank expected to keep interest rates unchanged at 5.25%. The latest inflation report showed headline and core readings slowing further, while labor market data showed an increase in the unemployment rate and job losses with high wage growth. At the last meeting, the vote split changed, with the fiercest members joining the camp to keep rates unchanged and Dhingra remaining the usual dissenter, voting for a cut. The market is expecting the first rate cut in September and it is unlikely that we will see the BOE make any big changes in the upcoming decision.

Volatility in bank traders’ expectations – average expectations for the quarter 1.25 and a likely choppy range until the end of the year with wider price fluctuations.

Likely test of TPO Projection Line at 1.2420 and thinning volume profile below 1.24, with expected rejection of 1.2360/80