It was a very choppy day if trading in this pair where a combination of dollar strength and the BOE served to place the pair in all kinds of volatility and ultimately the pair ended the day almost at the same place where it began. This is a sign of bearishness in the pair as it continues to trade below the important 1.40 region as of this writing and if this continues till the end of the week, we should have a bearish close which will point to further losses in the short term.
GBPUSD Does a Volte Face
It was expected to be a volatile day for the GBPUSD pair as the BOE was set to make the rate announcement and statement as well but the kind of volatility that came about was not something that was in the plan. The BOE was expected to keep the rates on hold and not tickle the markets too much as the Brexit process was going on in full swing. As expected, they kept the rates on hold but in the statement, they made a clear indication that they are looking to hike rates pretty soon.
With many of the major countries hiking rates on a regular basis and also looking to end the cycle of lower rates, the BOE would not want to be left behind by delaying the rate hikes by too much. That is why they are looking forward to rate hikes pretty soon. This hawkish indication led the pair higher as it broke through the 1.40 region and for a brief while, it looked as though it would continue higher. But that did not come to fruition as it was met by technical selling as it approached a technical resistance level and this led the investors to give up their buying easily. The pace and the size of the fall should worry the bulls in the short term.
Looking ahead to the rest of the day, we do not have any major news from the US but we have the manufacturing production data from the UK which should bring in volatility. The pair is clearly in a bearish grip and they need to ensure that the pair finishes the week at the 1.40 level for it to confirm the bearishness and lead to more losses in the coming week.
This article was originally posted on FX Empire
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