Forex Technical Update
GBP/USD 1H Chart 5/10/2012 7:22AM EDT
The Bank of England met and as expected held the benchmark interest rate at 0.5%. The asset purchase program which was at 325 pounds also remained the same. According to Nick Nasad, chief market analyst, there was some concern whether the double dip recession developing will cause the BoE to increase the monetary stimulus especially with the program running out at the end of the month.
The non-action is providing relief for the GBP/USD which has slid from 1.63 to 1.6070. This modest decline is now being challenged as the market pushes against 1.6150/60 area, which was support during the May2-May4 consolidation. This level also coincides with a declining trendline.
While the GBP/USD is resilient, the general direction over the past week into this one is still bearish. The 1H RSI can offer a clue to when the market looses the bearish momentum. If the reading breaks back above 60, while price breaks back above 1.62, the GBP/USD's decline is likely held off for a a sideways market if not a bullish continuation. In either case, 1.6280-1.63 area will be in sight.
If the market fails to push through 1.62, we still have downside bias back toward the current lows, and even the 1.60 handle. The 1.60 level is a psychological pivot and is near a rising trendline seen in the daily chart.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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