GBP/USD: a quest for direction (video)
GBP/USD traded this week in a narrow range and was clearly looking for further direction.
The uncertainty was mainly caused by the Bank of England. It’s not easy to understand its policy. A week ago its meeting minutes were dovish. During the past week, however, Governor Mark Carney said the case for interest-rate increases has become “more balanced.” Such words from Carney supported the pair. Never the less, all British economic data releases in the past week missed the forecasts, and so the bulls lacked strength. On the one hand the problem of the Scottish independence vote has gone away, but the investment flows to the UK which used to drive GBP up declined ahead of the referendum, and it will take time before they restore.
The level $1.6400 turned out to be a strong resistance. As a result, the peak at $1.6520 continued dominating the market, and a break below $1.6270 will confirm a temporary top. Daily moving averages send a bearish signal as well. At the weekly chart the bullish Ichimoku Cloud has become very thin. A 100-week MA is located at $1.6090. Further support is at $1.6050.
As traders try to understand which central bank is more hawkish – the Bank of England or the Federal Reserve, they will closely monitor economic news in both countries. Next week there will be several important releases in the UK: British current account on Tuesday and Manufacturing, Construction and Services PMIs on Wednesday, Thursday and Friday.