GBPUSD Forms Bullish Pennant Following the BOE Rate Statement
Yesterday, the pound was the biggest winner among the major currencies against the US dollar. GBPUSD was up 0.59% or 76.2 pips after the New York session as it closed at 1.3095.
Ahead of Mark Carney’s last rate statement as Governor, markets were split on whether or not the BOE would cut rates. As it turned out, the Monetary Policy Committee (MPC) thought that it would have been too early to ease even more. They acknowledged signs of economic growth stemming from optimism following the general elections. THe BOE, however, warned that if inflation or economic data deteriorates, they would not hesitate to cut rates.
It also helped that the number of MPC members who voted for a rate cut remained at 2. It was earlier predicted that at least three members would call for further easing.
On the 4-hour chart, we can see that GBPUSD has traded past resistance at the 100 SMA and 200 SMA. It is now testing resistance at the falling trend line (from connecting the highs of December 31, January 22, and January 24). It has formed a few reversal candles which may suggest that it could soon fall to support at 1.2975 where it bottomed yesterday.
However, a closer look at the recent price action on GBPUSD also shows what looks like a bullish pennant chart pattern. In forex trading, this is considered as a bullish continuation pattern. It is characterized by a short period of consolidation following a drastic rally. A close above yesterday’s high at 1.3108 could suggest that GBPUSD may soon test resistance at 1.3150 where the currency pair peaked on January 23. If it does not hold, it could trade even higher to 1.3265.