As you know, last week the Bank of England kept its interest rate at 0.25%; however, it surprised the market participants. Three of the eight members of the Monetary Policy Committee voted to tighten monetary policy, citing signs of accelerating inflation in the UK. This information caused a sharp reaction of the markets. The GBP / USD pair strengthened in the moment by 100 points, however, subsequently the pound declined; The Bank of England did not take any measures in either direction.
Nevertheless, the pound continues to remain under pressure in the foreign exchange market amid political uncertainty. Conservatives failed to achieve an absolute majority in the British parliament, and talks between British Prime Minister Therese May on the formation of a coalition with the Northern Ireland Democratic Unionist party have reached a deadlock. After the June 8 elections, the pair GBP / USD fell by about 350 points. And the pressure on the pair seems to be mounting.
Yesterday, Bank of England Governor Mark Carney said that it is still too early to think about raising rates in the UK, which further lowered the expectations of British currency buyers for its growth.
As shown by the data published last week, real wages in May decreased by 0.6% compared to the same period last year. The incomes of the country's population are declining because of inflation. Consumer spending is one of the important components of GDP growth in the UK, and their decline adversely affects the growth of the British economy.
Today (at 10:30 GMT) the Queen of Great Britain is expected to speak, at 11:00 - Andrew Haldane, Executive Director for Monetary and Credit Analysis and Statistics of the Bank of England, as well as a member of the Monetary Policy Committee, and on Friday (18:00 GMT) - member of the Committee for Monetary Policy of the Bank of England Christine Forbes.
It is likely that key representatives of the Bank of England will also express their opinion in the spirit of their boss Mark Carney about the prematureness of raising rates in the UK, which will further weaken the position of the pound.
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Support and resistance levels
After the parliamentary elections in Great Britain on June 8, the GBP / USD pair broke through the important support levels of 1.2800 (EMA200 on day and 4-hour charts), 1.2715 (EMA144 and the bottom line of the rising channel on the daily chart) and develops a downward trend.
Indicators OsMA and Stochastics on the 4-hour, daily, weekly charts went to the side of sellers.
The pound continues to remain under pressure amid uncertainty around Brexit.
In case of breakdown of the support level 1.2430 (the lower limit of the uplink on the weekly chart), the GBP / USD pair will go to the support levels of 1.2370, 1.2110, 1.2000 (the minimums of the global wave of the GBP / USD decline, which began in July 2014 near the level of 1.7200).
Negative dynamics in the pair GBP / USD prevails.
The alternative scenario implies the return of the GBP / USD pair above the level of 1.2800 with the prospect of further growth within the upward channel on the daily chart with targets of 1.3050 (annual highs), 1.3210 (23.6% Fibonacci retracement correction from 1.7200 level), 1.3300 (upper Border of the rising channel on the daily chart).
Support levels: 1.2550, 1.2485, 1.2370, 1.2340, 1.2110
Resistance levels: 1.2640, 1.2715, 1.2800, 1.2950, 1.3000, 1.3050, 1.3100, 1.3210
Trading Scenarios
Sell Stop 1.2580. Stop-Loss 1.2650. Take-Profit 1.2550, 1.2485, 1.2340, 1.2110
Buy Stop 1.2650. Stop-Loss 1.2580. Take-Profit 1.2715, 1.2800, 1.2850, 1.2900, 1.2950, 1.3000, 1.3050, 1.3100, 1.3210, 1.3300
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