- 64% of pending orders in the 100-pip range are to BUY
- 64% of traders are bullish on the Pound (+5%)
- Strong support area is located circa 1.3040
- Upcoming events: UK Services PMI, US Average Hourly Earnings m/m, US Non-Farm Employment Change, US Unemployment Rate, US Trade Balance, US ISM Non-Manufacturing PMI, US Factory Orders m/m, FOMC Member Kashkari to speak
The British Pound plummeted sharply against the Greenback, as the Bank of England announced changes in its monetary policy. Data hurt the GBP/USD currency pair, putting the rate 0.77% or 102 base points down to the 1.312 mark, close to the monthly low.
The Bank of England raised interest rates from 0.25% to 0.50% for the first time in ten year, adding that further increases would be determined by the outcome of Brexit negotiations and how the country prepares to quit the European Union. Britain's economic expansion slowed markedly since the Brexit vote, the factor delaying the rate hike, but the BoE Governor Mark Carney feared that Brexit could aggravate already weak productivity and make the economy prone to high inflation.
Focus on US data
The last day of this trading session is going to start with the British Services PMI for the month of October at 0930GMT. The rest of the day will be devoted to fundamentals coming from the United States.
The US Bureau of Labour Statistics is set to publish the Average Hourly Earnings, Non-Farm Employment Change and Unemployment Rate for the previous month at 1230GMT. Data on Trade Balance is likewise released at the same time.
Subsequently, the ISM Non-Manufacturing PMI and monthly Factory Orders are to be published at 1400GMT.
Finally, President of the Federal Reserve Bank of Minneapolis Neel Kashkari is due to speak about monetary policy and the 2018 outlook at the Women in Housing and Finance luncheon at 1615GMT.
GBP/USD sinks to 1.3040 amid interest rate hike
A decision to raise the interest rate led to 110 points fall of the rate. Initially, the bottom line of a dominant ascending channel managed to halt the pair near 1.3120. However, the subsequent Governor Carney press conference boosted this process and bears managed to push the pair to the weekly S1.
On daily chart it seems that yesterday's downfall confirmed existence of a new medium-term descending channel. However, even in that case it looks like the Pound has to restore some lost positions before making a decisive breakout from the dominant ascending channel.
An upcoming release of the British Services PMI might provide some small impulse for the upward movement. On the other hand, the two resistance levels near 1.3085 and 1.3107 most likely will manage to constrain the pair.
Hourly chart
The BOE decision released mid-Thursday resulted in a strong selling spree of the GBP/USD exchange rate. This downward pressure allayed only in the evening when the rate had already dashed through the 100-day SMA and the monthly S1 circa 1.3080.
As a result, the pair reached the lower boundary of the medium-term channel. In accordance with this pattern, the rate should reverse to the upside and approach the upper boundary of the senior channel near the 1.34 mark within the next week.
Daily chart
Bulls strengthen their positions
The bullish SWFX market sentiment has increased by five percentage points in this session, thus currently standing at 64%. In addition, 56% of pending orders are to buy the pair (-13%).
OANDA traders are bullish in this session, as 59% of open positions are long on Friday (+6%). Meanwhile, Saxo Bank clients are still in favour of a fall; however, the number of short positions has decreased to 56% (-8%).