After the interest rate decision by the BOE on May 6 to hike interest rates 25 bps from 0.75% to 1.00%, the Sterling has been seen to have strong reactions.
GBPUSD
Cable has been in a constant downward trend since last year, however, due to recent world events the price has accelerated its fall in the past 3 weeks and now even more with the decision of the BOE, giving sharp falls of up to almost 300 pips in some days, falling from 1.3000 to a new low at 1.2260 yesterday, a drop of approx. 740 pips in a few weeks.
It is currently below the Fib 61.8% level of the cycle that began in March 2020, which was at 1.2493 that was broken 3 days ago. In the last 2 days the price marked a hammer and a spinning top that are locked between 1.23-1.24, which could signal a pause to the downtrend to mark a retracement before continuing it.
Resistances: Psychological level 1.2400, Fibo 61.8% and psychological level at 1.2500, 20-day SMA at 1.27000, from there to the level broken 3 weeks ago at 1.3000.
Supports: Lows at 1.2300 tested the last 2 days without breakout and 1.2100 both marked in 2020 before the psychological level of 1.2000 that joins the Fibo level 78.6% at 1.2016.
ADX at 47.18 with range, +DI8.45 neutral bias, -DI 22.52 with bearish bias. ADX very close to the limit at 60 and already showing signs of exhaustion.
GBPJPY
GBPJPY has downward pressure due to the appearance of the pattern known as head and shoulders, which had a maximum at 168,41 on April 20 and has currently broken the 21-day SMA several times and fall to the collarbone that is marked by an area that joins the psychological level of 160,00, the 50-say SMA at 160,05 and the Fibo 50% at 159,69. If this support breaks the pattern could fall to the next support area, around 800 pips lower, almost at the beginning of the cycle that started at the beginning of March, below the key 100- and 200-day SMA.If there is a failure to break the latter, we could see the typical upward movement that would have to overcome the previous 2 highs marked by the right shoulder and the head of the skipper to catapult to 2015 highs at 190,00.
ADX is marking 25.70 after falling from its high above 60, +DI at 11.61 & -DI at 15.98 both presenting a bearish bias. The upward trend is slowing down, and a rebound at the level of 25 with a cross of -DI above the +DI could start a downtrend or in case it falls below 25 we would expect to drill upwards of this level to confirm a trend.
EURGBP
EURGBP has been in an expansion downwards channel for more than a year with bearish bias rising and leaving lows at 0.8200. In the last month it recovered some losses, marking a higher low, spiking and breaking the 200-day SMA. Last week it posted one of its strongest daily performances with a rally of more than 100 pips to a 0.8590 high, retesting the highs of December and November 2021. A bullish break could be a change of the trend for the upside; if the September highs are breached along with the psychological level 0.8700 the doors could be opened to 0.8900.
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Aldo Zapien
Market Analyst – Educational Office – Mexico
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