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British Pound is Looking for Support ahead of the BOE


The British pound is trading below the fifty (50) percent Fibonacci level. The GBP/USD currency exchange rate has found some support around 1.36. This is a key psychological level.

On Wednesday, the U.S. Federal Reserve announced that they would begin tapering back their emergency pandemic asset purchases later this month. The Federal Reserve’s monetary policy statement noted that policy makers are worried about rising inflation, however feel it is transitory.

The spiking inflation comes from “that supply and demand imbalances.” The central bank noted improving economic conditions and progress in the labor force.

As far as reducing their monthly asset purchases, the central bank will reduce Treasury purchases by $10 billion in November and mortgage backed securities by $5 billion.

The Federal Reserve left the door open for how fast or slow they move with tapering. Their policy statement read that “it is worth noticing that the central bank left the door open for adjustments at the QE’s pace.”

They also said that “comparable decreases in buying pace are likely reasonable each month, but we are willing to adapt if necessary.” Today is the Bank of England’s “Super Thursday.” The British central bank will announce their monetary policy and rate decision.

The financial markets have priced in a rate hike as the Bank of England is worried about inflation. The Old Lady will also publish economic and price forecasts, monetary policy statement and hold a press conference.  

Daily British Pound Technical Analysis (GBP/USD)

Looking at the above daily MT 4 price chart, the 14 day relative strength index (RSI) is trending lower and below the mid-point.

The British pound is also holding above the psychological level at 1.36. Right now, the bulls seem uninterested in the GBP/USD Forex market.

A daily close 1.36 opens the door for the static technical support level in play at 1.3530. Initial upside resistance is at the 50 percent Fibonacci level near 1.3630. There is a congestion zone at 1.3670 to 1.3680. Then 1.3740 comes into play next.

About David Frank

David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.

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