Forex News: The pair remained relatively calm throughout yesterday’s trading session and the FOMC decided to maintain the rate unchanged as it was widely expected, so the impact was mild. However, price reached support on the back of upbeat information contained in the Rate Statement.
The pair has created short-time resistance around 1.1655 – 1.1660 and is now testing the support at 1.1610, with the oscillators showing a bearish bias. This means that the bullish pullback may be over and that we will see a break of the current support, followed by a move into the low at 1.1575; however, a bounce from 1.1610 – 1.1600 will most likely take the pair into the 50 period Exponential Moving Average. Our bias remains bearish and we consider the move up just a normal retracement after a big drop.
The U.S. Unemployment Claims will be today’s only highlight, scheduled at 12:30 pm GMT and expected to show a number of 235K. The indicator has a low-to-medium impact, mostly because it is released weekly so the changes are not significant; however, a higher number of unemployed individuals usually weakens the currency, due to consumer spending implications.
Yesterday the Pound bulls took price above the resistance at 1.3280 on the back of a better than expected British Manufacturing PMI but the US Dollar made a comeback later in the session and brought the pair below the previously mentioned level.
Price shows rejection at 1.3320 and has moved below the previous resistance at 1.3280 after an overbought condition showed by the Relative Strength Index. These are clear bearish signs, which suggest that we will likely see an encounter with the 50 period Exponential Moving Average. That being said, today’s price action will be heavily affected by Bank of England’s rate decision, thus the technical aspect will be secondary.
Today is a huge day for the Pound, mainly because the Bank of England is expected to hike the interest rate from the current 0.25% to 0.50%. If this happens, we will likely see increased volatility and strength for the Pound.
The announcement is scheduled at 12:00 pm GMT and at the same time the BOE will release their Inflation Report, containing economic and inflation projections for the next 2 years. Half an hour later, at 12:30 pm GMT, BOE Governor Carney will hold a press conference, discussing the Inflation Report. This is another reason for increased volatility, so caution is strongly advised.