GBP/USD: Carney has not take drastic decisions
1. Current trend
On Tuesday the currency pair GBP/USD fell to the level of 1.5330. Downward movement in price was caused by sharp reduction of the US trade deficit from 44.1 to 34.2 billion USD in June. This morning the pair continued to weaken in advance of the speech of a new governor of the Bank of England Mark Carney. Investors believed that Carney could change monetary policy of the Central Bank of England as he repeatedly hinted. However, Mr. Carney said in his speech that monetary policy of the Bank of England would not be changed until unemployment rate in the country drops to the level of 7.0%. So far the Bank will continue to purchase troubled assets for the amount of 375 billion pounds and interest rates will not be raised. Recall that since last December unemployment rate in the UK has maintained at the level of 7.8%; key interest rate is currently 0.50%.
2. Important levels: support and resistance
In general, market positively assessed statements by Mark Carney and after the short-term decline the Pound started to grow. At the moment the price is rising to the level of 1.5400 and if this level is broken down, the pair may go up to the level of 1.5490. In the current situation it makes sense to open long positions from the level of 1.5400 with profit taking at the level of 1.5490.
3. Technical indicators
On the daily chart the moving average line of “Bollinger bands” is directed upward; the price chart tends to the upper line. Histogram of MACD has moved to the overbought zone, however this fact is not yet considered as a clear signal to buy. The lines of Stochastic are directed upward, giving a buy signal.
Dmitriy Zolotov
Analyst of LiteForex Group of Companies