The GBP/INR pair resumed the downward trend on Monday with a 0.2% drop, continuing the declines seen on Thursday and Friday last week after the pair had hit resistance at 91.7315. This move follows the continued bearishness of the British Pound, triggered after the Bank of England predicted a prolonged recession for the UK.
This week, the Bank of England will make another rate announcement. The market consensus is for the BoE to take the UK’s interest rates from 1.75% to 2.25%. This decision comes up on Thursday, and with nothing major on the calendar from the Indian side of things, the price action on the pair will be dominated by market reaction to this decision.
From a technical analysis standpoint, the price action follows a breakdown of the expanding triangle, traditionally a topping pattern and not a continuation pattern as seen in this sequence. Furthermore, the continuation of the downtrend has extended beyond the end point of the measured move from the rising wedge’s breakdown.
There would be a solid case for the GBP/INR to make a short-term recovery if the Bank of England raises rates by 50bps or more, given that the pair has fallen so steeply and is now at attractive buy points. Here are the potential plays for the market participants on the GBP/INR.
The breakdown of the expanding triangle has met a wall at the 90.8397 support. If this wall breaks down, the 89.7622 support (15 October 2019 low) becomes the new downside target. 88.7534 (21 June and 26 August 2019 highs) becomes a new harvest point if the bulls fail to defend the 89.7622 price pivot.
A bounce from the current support targets 91.7315 immediately before 92.6933 enters the mix as the next upside target. 93.3643 and 94.3257 (13 May and 15 July lows) form additional targets to the north before 95.0820 (21 July low) recreates itself as a resistance barrier if the bulls uncap the previous two targets.