Today, the BOE interest rate decision is scheduled later in the EU session, which can cause some major moves for GBPUSD. So, let us analyze the pair and search for the related trade opportunities. There is a bearish hidden divergence forming on the 4 hour chart, and there are several resistances on the way up for GBPUSD. First resistance comes in at around 1.6145 followed by 1.6160 and 1.6190. I think we should be looking for sell opportunities in the short term.
We can wait for the pair to make a move higher and then trade accordingly. We will enter a sell trade once the pair makes a stop at any of these resistances, and forms a continuing divergence on the 1 hour chart along with the bearish candle pattern.
If you want to trade aggressively, then there is a minor up-move trend line as shown in the 1 hour chart below. There is also a support at around 1.6060. We can enter a sell trade if the pair moves down, breaks the trend line and the most relevant support and closes below it.
Note, I would prefer selling rallies as it would decrease the risk and increase the reward. Initial target should be around 1.5980 and final target could be the last low of 1.5910. Stop should be placed above 1.6210 for the first scenario and above the broken support around the trend line for the second scenario.
Reviewing yesterday’s events and trades
EURUSD moved to the upside yesterday after better than expected data from the Euro zone. Euro zone composite services PMI jumped to 51.6 from the previous reading of 50.9. Also, German Factory orders registered a massive gain of 3.3% beating the expectations of 0.5%. Similarly, UK Industrial and production data came better than expected, which pushed GBPUSD to the upside again. However, both the pairs are still trading below the key swing levels.
Fundamental Outlook for the day
Today is an important day as Bank of England (BOE) and European Central Bank (ECB) interest rate decisions is scheduled later in the day. BOE is expected to keep the interest rates at 0.5% with no change in asset purchases. The ECB is also likely to keep the interest rates unchanged at 0.5%, but the focus would be on ECB President Draghi’s speech. Investors would be watching his speech closely in order to know more about the forward guidance from the ECB, and hints regarding further rate cut or another LTRO. Also, US GDP and Initial jobless claims data are scheduled during the day. US is expected to register a growth rate of 2.0% against the previous of 2.5%. A 0.5% reduction is expected due to the US shut down.
This analysis is taken from today’s Daily Market Forecast, which also includes trade opportunities on: USDJPY, NZDUSD and EURNZD.
Get it HERE: Vladimir’s Markets Forecast
Trade safe friends. Happy trading!
