GBP/USD: growth amid the rhetoric of the Bank of England 09 February 2021, 10:15

GBP/USD: growth amid the rhetoric of the Bank of England

09 February 2021, 10:15

Scenario
Timeframe	Weekly
Recommendation	BUY STOP
Entry Point	1.3830
Take Profit	1.4000
Stop Loss	1.3760
Key Levels	1.3300, 1.3375, 1.3825, 1.4000

Alternative scenario
Recommendation	SELL STOP
Entry Point	1.3700
Take Profit	1.3375
Stop Loss	1.3800
Key Levels	1.3300, 1.3375, 1.3825, 1.4000

Current trend

The GBP/USD pair grows, preparing to break the level of 1.3825.

The instrument is strengthening although last Thursday the Bank of England kept its interest rate at 0.10% and left its quantitative easing program unchanged. The regulator lowered its forecast for UK GDP growth in 2021 from 7.25% to 5% and urged banks to prepare for negative interest rates, if necessary. At the same time, the Bank of England noted that soon, negative rates will not be introduced, and creditors will need at least six months to prepare in case of a change in monetary policy.

Since last Friday, USD started to weaken. Markets are still awaiting the adoption of the $1.9 trillion national economy support bill proposed by the US President Joe Biden's administration. However, the US macroeconomic statistics negatively affect USD in the short term. The country's inflation rate accelerated to its highs since 2014, driven by higher crude oil prices amid rising expectations for an economic recovery. The 10-year break-even rate, the difference in yield between the 10-year Treasury bond and its inflation-protected counterpart, hit 2.21% on Monday, according to Bloomberg. The release of new negative macroeconomic data will negatively affect USD, while the approval of the draft law on aid in full will support it.

Support and resistance

The price broke the resistance level of 1.3750 and approaches 1.3825. The consolidation above 1.3825 allows growth to 1.4000. In the medium term, there is an upward trend. The key support is at 1.3350–1.3300. The fall of the instrument below 1.3700 means the formation of a False breakout pattern, as a result of which, short positions with the target at the key support will become relevant.

Resistance levels: 1.3825, 1.4000.

Support levels: 1.3375, 1.3300.

 

Trading tips

Long positions may be opened after the breakout of 1.3825 with the target at 1.4000 and stop loss 1.3760. Implementation period: 5–7 days.

Short positions may be opened below 1.3700 with the target at 1.3375 and stop loss 1.3800.