GBP/USD: BOE Event May Spark Next Bullish Run

Hourly Chart
GBP/USD Hourly" title="GBP/USD Hourly" height="629" width="988">
Cable has recovered significantly since Monday, where prices almost tagged key support 1.59. By trading close to 1.61, the immediate risks of a Double Top pattern seen on Daily Chart is diminished, and opens up a potential move towards 1.625 for a potential Triple Top pattern or even a bullish extension scenario.

However, short-term bias is mixed. Prices remain above 1.607 support, but we are also trading below the rising Channel Top, suggesting that pace of bullish momentum has been taken a notch lower. Stochastic readings isn't that clear as well, with readings pointing higher but facing "resistance" around the 60.0 level. Hence, it is an understatement when we say that price direction is uncertain, and it is anybody's game to take.

Bank of England Rate Decision coming in 2 hours time may be the game changer though. With the Monetary Policy Committee unanimously voting to keep interest rates and Asset Purchase program as it is last time round, it is highly unlikely that 5 of the MPC voting members will swing to the opposite side and form a dovish outcome today. As such, it is likely that GBP/USD may enjoy a small pop following the rate decision event. Generally the likelihood of an immediate pullback would be high as market would have fully priced in the outcome earlier. However, with prices needing directional cues right now, the small bullish move may actually result in further bullish cascade, and triggering the next bullish momentum if we stay above 1.612 after the event.

If prices do push up to 1.612 but trade back lower again, the immediate short-term bias would be bearish, but that may not necessarily mean that a new bearish move will emerge especially if prices stay above 1.607. This can be interpreted as prices reverting back to the "neutral" position once again, and traders may need to wait for further cues (e.g. NFP Friday) for direction.

Original post