UK Manufacturing Won’t Send GBP/USD Past 1.30, But The BOE Might
Skerdian Meta • 2 min read
Yesterday, GBP/USD had three attempts at 1.30 but it failed to break above that big resistance level. Today we´re not that far below it, so another attempt, right? Will the fourth time be the charm?
The more a support/resistance level is hit, the more likely it is to be broken. So, if we do have another go at it today, I´m afraid it might be broken. The opposite is true as well; if the hit fails once again, it is likely that a substantial retracement will follow (which is long overdue).
There´s a slight chance that the UK economic data today might do the job, though it's unlikely, unless the numbers are really great. The UK manufacturing production, industrial production, construction output and trade balance are to be released at 09:30 am GMT. Though, as I said, unless we see some fireworks I don´t think we will see any big moves.
One of the reasons for this is the BOE (Bank of England) meeting later today. Inflation in the UK has been running on the fast track due to a weaker Pound and the global trend.
That should have been enough of a reason for the BOE to start hiking interest rates, but Brexit is here/coming and the economy is not doing great.
Recently, oil prices have lost some steam and the Pound is about 8-9 cents higher than it was two months ago. That should have taken some pressure off inflation expectations. It will be interesting to see if this will be reflected in the BOE statement.
If it does, then that would be the comment which would start the retrace of GBP/USD. It´s obvious that the BOE likes this scenario and it will strongly emphasize if the inflation expectations are lower, because they don´t want to hike the rates with Brexit around the corner.
The conclusion is that fundamentally, this is a sell trade, while technically it´s 50/50. If 1.30 survives, I suggest selling with a stop above 1.30 and a 200-300 pip TP target. Although we have to see what´s going on with the USD, seeing as the GBP represents only one side of the pair.