LONDON -Picadilly Circus junction. Image source: S4svisuals © 123RF.com
The GBPUSD continues to fluctuate in range as liquidity wanes. BOE's policy decision from today could serve as a catalyst for the next directional swing. Read more about the prevailing market sentiment on the pair from our last comprehensive analysis.
The Monetary Policy Committee (MPC) of the BOE expectedly voted unanimously to keep the near-negative Official Bank Rate unchanged at 0.10 per cent. Additionally, the total amount of quantitative easing was also maintained unchanged at 895 billion sterling.
GBPUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, GBPUSD's price action is currently probing the upper boundary of the descending channel. The latter can be perceived as a Flag pattern, in which case, a potential breakout above it would likely signify the likely continuation of the broader uptrend.
Despite the temporary consolidation of the price action above the 50-day MA (in green), which is a bullish signal, for the time being, the price action is failing to establish such a decisive breakout. Meanwhile, the underlying momentum remains ostensibly bearish-oriented, as underpinned by the MACD indicator.
Even still, if the GBPUSD manages to break out above the upper limit of the Flag, the next target for the uptrend would be the 61.8 per cent Fibonacci retracement level at 1.39897. Its close proximity to the psychologically significant resistance level at 1.40000 makes it a prominent turning point.
Conversely, a potential reversal from the current spot level could then throw the price action lower towards the 38.2 per cent Fibonacci retracement level at 1.38299. The latter is about to converge with the 100-day MA (in blue), which serves as a floating support.
BOE's more hawkish-sounding policy stance
Even though the MPC did not tweak the underlying settings of the monetary policy stance, the Committee's hawkishness is now more pronounced. One member of the Committee voted in favour of decreasing the breadth of the Asset Purchase Facility, while another surprisingly decided to refrain from voting.
The Monetary Policy Committee voted unanimously to keep interest rates at 0.1% and by a majority of 7-1 to maintain the amount of quantitative easing at £895bn. https://t.co/gZfLBg8Gqh #MonetaryPolicyReport #BankRate pic.twitter.com/IEjOh9YHsh
— Bank of England (@bankofengland) August 5, 2021
"The Committee’s updated projections for activity and inflation are set out in the accompanying August Monetary Policy Report. They assume that, despite the spread of the Delta variant, the impact of Covid on the UK economy fades further over time. They are also conditioned on the market path for interest rates."
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