GBP/USD: on the eve of the Bank of England meeting _01/08/2016

Trading recommendations

Sell ​​in the market. Stop-Loss 1.3310. Take-Profit 1.3120, 1.3060, 1.2900, 1.2800, 1.2700

Buy Stop 1.3320. Stop-Loss 1.3260. Take-Profit 1.3400, 1.3500, 1.3630, 1.3700, 1.3800, 1.3860


Technical analysis

Pending the decision of the Bank of England at the rate of steam Thursday GBP / USD remains under pressure below 1.3320 resistance level (EMA144), 1.3440 (EMA200 on 4-hour chart). Two previous week pair GBP / USD held within a range between the levels of 1.3290 and 1.3060. Indicators OsMA and Stochastic on the weekly and monthly charts are on the side of the sellers. The pair GBP / USD is in a downward channel on the weekly chart with a lower limit, passing below the level of 1.2700.

In the case of reducing the rate the pound falls sharply on the currency market. Downward movement of the pair GBP / USD will be accompanied by the breakdown of support levels 1.3360, 1.2900 the lower boundary of the descending channel on the weekly chart and the level of 1.2700. This is the most likely scenario.

If a lower interest rate or extend the program of quantitative easing in the UK does not happen, the pound strengthened sharply on the currency market. In this case, the sample is likely resistance level 1.3440 and the pair GBP / USD up to the 1.3630 level (lows in 2009, 2001, closing price of "Black Friday").

However, such fundamental factors as the uncertainty of future prospects for the UK economy against the backdrop of Brexit, expectations for further easing of monetary policy in the country will put pressure on the pound. And the likelihood of rising will strengthen downward pressure on the pair GBP / USD interest rate in the US before the end of the year.

More preferred at this point is the position at reducing pair GBP / USD in the medium term.

Support levels: 1.3060, 1.2900, 1.2800, 1.2700

Resistance levels: 1.3290, 1.3440, 1.3500, 1.3630, 1.3670, 1.3700, 1.3800, 1.3860


Overview and Dynamics

The focus of the financial markets this week will be:

- Bank of England's decision on monetary policy, which is published on Thursday (11:00 GMT),

- Data on the labor market in the US in July (the number of new jobs created is with / agricultural sector of the US economy (Non-Farm Payrolls), as well as US data on unemployment).

A significant current account deficit of the United Kingdom and expectations of slowing economic growth in the country's balance of payments in connection with Brexit increase the downside risks to interest rates in the UK at the forthcoming meeting of the Bank of England on Thursday. At the previous meeting, the rate decreased was not contrary to market expectations and hints BOE Mark Carney that the rate will be reduced "this summer." Now the probability of a rate cut on Thursday increased significantly.

It is also expected that they will increase the volume of purchases by the Bank of England assets within

 "quantitative easing" for 100 billion pounds to 475 billion pounds.

Earlier, in mid-July, the Bank of England's Andy Haldane representative also spoke about the fact that in August it will be necessary "significant" easing of monetary policy in the UK. The uncertainty of the future prospects of the country’s economy amid Brexit exerts strong pressure on the pound.

The unexpected decision of the Bank of England at the July meeting to keep interest rates in the UK at 0.5% has surprised the financial markets. In a subsequent statement, however, the Bank of England said that "most of the members of the committee expect easing policy in August."

Thus, expectations of «significant» easing of monetary policy in the UK are high.