Pound Rises on BoE Meeting But May Fall Back Down

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Pound Rises on BoE Meeting But May Fall Back Down

After falling for two days, the British Pound jumped around 60 pips against the US dollar trading at 1.6177 before the Market open in New York. This may have occurred because some market participants were anticipating chances of further quantitative easing by the Bank of England (BoE), but it didn’t change its monetary policy in today’s meeting in the European session.

Technical Analysis

British Pound v.s. US Dollar 4-hour Chart with Ichimoku & Fibonacci, May 10, 2012Short-Term: On the 4-hour chart, the British Pound AKA Sterling is trading below the Ichimoku cloud against the US dollar, but today’s rally has brought it closer to the lower band of the cloud. A close inside the Ichimoku cloud could bring a short-term consolidation in GBPUSD, while a close above it may bring further rallies back to the 1.63 area, since the pair seems to have found short-term support at 50% Fibonacci retracement level at 1.6067. A close below this level could open doors for a bearish bias and accelerate declines towards 1.5800.

Monthly: All the ups and downs in Pound-Dollar in the past three years have formed a triangle in the pair’s monthly chart, after the massive drop of 2008. I most cases, a triangle is a continuation pattern that forms during a trend, but sometimes it can be the beginning of an important trend reversal. For long term positions, a close above 1.67 will confirm a bullish outlook, while a close below 1.51 can open door to drops back to the lows of 2009 at 1.35.