EURGBP Trades in a Triangle Ahead of BOE Rate Decision. Here are the Levels to Watch Out For
The weakness in the pound could reflect the market’s expectations of the upcoming central bank decision. While the consensus is for interest rates to remain unchanged a t0.10%, it is widely expected that the BOE would increase its Quantitative Easing program. The forecast is for an uptick from 645 billion GBP to 745 billion GBP in asset purchases. This is to cushion the economic contraction brought about by the lockdowns caused by CoVid-19.
Traders will also be keeping an ear out for the BOE’s future plans. There are rumors that the central bank may be open to implementing negative rates soon. If BOE Governor Andrew Bailey suggests this in his remarks, we could see further pound weakness. On the other hand, if he expresses more hesitation in adopting negative rates, EURGBP could trade lower.
When you connect the highs and lows of EURGBP on the 1-hour chart, it can be seen that the currency pair is making lower highs and higher lows. Consequently, a symmetrical triangle has formed. By enrolling in our free forex trading course, you will learn that this is widely considered as a neutral indicator. That is, until a breakout happens.
With that said, a strong close above yesterday’s highs at 0.8989 could invalidate resistance at the top of the triangle. It could then imply that EURGBP may be on its way to near-term resistance at 0.9014.
On the other hand, a strong bearish close below the lows of June 16 at 0.8911 could mean that sellers are dominating the market. The currency pair could then fall lower to 0.8867 where it bottomed on June 9.