Bank of England Holds Rates at 0.50%; Asset Purchase Program Expanded
The Bank of England stated today that it will expand its asset purchase program from 75 billion pounds to 275 pounds. The currency market has been anticipating this type of action and has been bearish on the Sterling. This past 2 weeks has been period of consolidation, but after the revelation of this so called quantitative easing plan, the market looks ready to continue Sterling-weakness.
The market held GBP/USD's consolidation range this week below 1.5495. The 1H chart shows a strong reaction to the BoE statement as the market slid from that 1.5495 resistance all the way down below this and last week's lows near 1.5330. Note that the RSI never broke above 60, so that bearish momentum was intact. With the current price action, the market is reflecting its intent to continue the bearish mode in GBP/USD.
The break below 1.53 opens up 1.50 psychological pivot which is near a rising trendline connecting the Janurary 2009 low of 1.35 with the May 2010 low of 1.4230. Below 1.50 and the rising trendline, the market opens up lower pivots: 1.4780, 1.4230. The scope for these levels will be increased if subsequent pullbacks fail to break back above the 1.53 pivot, and eventually the 1.50 pivot.
We are also seeing strong reactions across the board. The market reversed the bull runs in GBP/CHF and GBP/JPY. The GBP/CHF is now testing a previous resistance now as support at 1.4145. GBP/JPY was rejected from topping action formed last week and looks poised to test this week's low at 116.80.
Fan Yang CMT
Chief Technical Strategist