During the last three weeks, the GBP/USD currency pair is the most active and volatile. The pound weakened against the US dollar by more than 5%. The trading instrument reached a psychologically important level of 1.3500. At the moment, financial market participants took a wait-and-see stance before the decision of the Bank of England on the key interest rate. The regulator will announce its decision on May 10 at 14:00 (GMT+3:00).
The Monetary Policy Committee will decide on the key interest rate at its two-day meeting on May 9-10, and also publish an inflation report and updated economic forecasts. It should be noted that the aggressive sale of the pound is connected with the release of weak reports on GDP, business activity, inflation and retail sales in the UK. This statistics has caused a sharp decline in market expectations regarding the rate increase by 25 basis points at the current meeting. Earlier, the head of the Bank of England, Mark Carney, said that the increase in rates could be postponed until the end of 2018. At the moment, most financial market participants expect that the Central Bank will leave the key interest rate unchanged at 0.50%.
We recommend you to pay attention to the comments by the Bank of England representatives. Some experts do not rule out that the regulator may take a more aggressive stance regarding further tightening of the monetary policy. Optimistic economic forecasts may provide additional support.
- Support levels: 1.35000, 1.33500
- Resistance levels: 1.36250, 1.37500
At the moment, the GBP/USD currency pair is consolidating. The trading instrument is testing the demand zone of 1.34850-1.35350. The local resistance is 1.36250. In the near future, a technical correction is not ruled out. On the hourly chart, a classic reversal formation of the price and MACD histogram divergence is observed. We recommend opening positions from the key levels.
If the price fixes above 1.36250, a correction of the GBP/USD currency pair is expected. The closest goal of fixing profits is the "mirror" resistance of 1.37500. In the medium term, the trading instrument may reach the 50.0%-61.8% correction zone.
Alternative option. If the price fixes below 1.34850, it is necessary to consider sales of GBP/USD. The movement is tending to the round level of 1.34000.
When following positions, we recommend using a trailing stop.