Despite finally breaking the 2010 1.6300 high, the $GBPUSD was unable to stage a breakout rally as many traders expected if price was to move above 1.6300. Rather, cable has been looking exhausted though it still does manage to maintain its bullish bias as it closed last week above 1.6250. Inflation and revelations of a 3rd BoE hawk have bolstered the $GBPUSD currency pair above the large quarter point at 1.6250. However despite the strong close, $GBPUSD opens the week trading below 1.6250 as the market opens. Choppy price action around 1.6250 suggest that the market is already looking ahead to the Bank of England interest rate announcement on Thursday. Should monetary policy remain unchanged, we could see the now anticipated sell-off in the $GBPUSD finally materialize. If so, 1.6100 remains the big level of contention between the bulls and the bears if the Fibonacci levels on the daily chart fail to hold. Below 1.6100, 1.6030 and 1.5990 become the levels to watch to the downside. If the BoE surprises the market with an interest rate hike, $GBPUSD will breakout towards the 1.6500 large quarter point and major half point.
The economic calendar is very light at the beginning of this week. Cable, therefore, will move based on the technicals. Immediately, at the market open, watch to see if 1.6235/40 support holds. Also, watch the Fibonacci retracement levels on the daily chart to see where bulls could step in ahead of the BoE interest rate announcement.
The $GBPAUD continues to hold the range it has forged out for nearly 2 months.
Price hit the top of the range at 1.6120 on Friday, found resistance and has since moved towards the middle of the range at 1.5950. If price moves below 1.5950, price will fall to the bottom of the range between 1.5830 – 1.5750. If price finds support above 1.5950, price will move back to the top of the range between 1.6070 – 1.6120.
The $EURGBP continues to remain bullish. Last week, I was concerned that the bears had stepped back in when price broke support at 0.8470. However, price did manage to find support at the level (on the candlestick daily close) despite the spike lows to 0.8458 and move higher to end last week near the 0.8600 highs.
As the new trading week opens, the $EURGBP maintains it bullish bias as it continues to find support at the former high of 0.8590 and trades around 0.8600 whole number. Bulls look to the highs at 0.8650 and 0.8670. Above there, 0.8700/50 remain the ultimate bull target. Fundamentally, the edge falls to the euro. Last week, after maintaining its monetary policy, the European Central Bank clearly signalled its intention to hike interest rates with very hawkish rhetoric during its press conference. As such, euro has caught a bid across the board. Several banks have now changed their calls to euro-bullish as a result of the fundamental shift in the market by the ECB. It also looks like an inverse head-and-shoulders chart pattern has formed on the daily chart of the $EURGBP which also supports the possibility of a breakout rally in the$EURGBP.