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  • Buoyed by Brexit optimism, renewed US-China trade talks led USD weakness.
  • BOE to keep rates steady, with 9-0 voting pattern, US CPI to tick high in August.

Having faced rejection near the 1.3080 in the overnight trades, the GBP/USD pair entered into a phase of consolidation around the midpoint of 1.30 handle, as traders gear up for the Bank of England (BOE) monetary policy announcement due at 1100 GMT.

GBP/USD could drop to 1.2950 if BOE disappoints the hawks

The spot trades in a 15-pips tight range so far this Thursday, consolidating the latest run-up to six-week highs at 1.3089, as markets await the BOE policy meeting and minutes for the next direction.

The tone/ language in the BOE’s monetary policy statement is likely to be closely eyed for fresh hints on the central bank’s rate hike outlook, as the BOE MPC is likely to leave the benchmark interest rate unchanged at 0.75%.

In the meantime, Cable will remain underpinned by the positive development around the Brexit issue after Bloomberg reported late-Wednesday that the EU would start redrafting the Irish Brexit protocol to appease the UK.  

Further, a recovery in the risk sentiment and broad-based US dollar softness following news that the US is reaching out to China to a start fresh round of trade talks also helped to keep the upbeat tone intact around the risk currency, the GBP.

Besides the BOE rate decision, the European Central Bank (ECB) monetary policy announcement and US CPI report will also remain in focus for any volatility-related effect on the pound.

GBP/USD Technical Levels

“.. in the 4 hours chart, it’s still finding buyers on dips toward a bullish 20 SMA. Technical indicators in the mentioned chart maintain their bullish slopes near overbought levels, with no signs of upward exhaustion. The pair has an immediate resistance in the 1.3090 price zone, and a break above it should open doors for a continued advance up to 1.3170, the 50% retracement of the 2016/18 rally. Below the 1.3020 region, on the other hand, the risk will likely skew to the downside, with the next relevant support being 1.2985, where the pair has the 61.8% retracement of the mentioned rally. Support levels: 1.3020 1.2985 1.2940. Resistance levels: 1.3095 1.3130 1.3170,” FXStreet’s Chief Analyst Valeria Bednarik noted.

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