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- This morning brought another Super Thursday to the fray for the Bank of England, and after the last instance in November saw the BoE guide inflation forecasts higher, producing strength in GBP for the remainder of the month, this morning’s announcement saw the bank take inflation forecasts lower despite the fact that they increased growth forecasts for 2017 by 42% (to 2% from a prior expectation of 1.4%).
- The takeaway price action from this morning’s BoE event was bearish; but given the increased growth forecasts within the U.K. economy, there may be reason for bulls to remain optimistic for higher levels of inflation later in the year, and many of the recently-fired GBP up-trends are finding support at higher-lows.
- The first pair we looked at was Cable. GBP/USD is working attempting to dig-in support around the 23.6% retracement of the most recent bullish move; but a bit lower, at around 1.2418, we have an interesting zone of potential support as this level had previously been a prominent swing-high.
- We then moved over to GBP/JPY, which may be more attractive to GBP-bulls at the moment. The level of 140.76 is very interesting, as this was the previous area of support when the pair was showing a descending wedge on January 23rd and 24th. This had also helped to set the low this morning, which saw multiple tests in the wake of the BoE. The fact that price action did not break below is encouraging, and this could set GBP/JPY as more attractive for bullish-GBP strategies.
- We then moved over to GBP/CHF to look at an interesting trend-line as the pair attempts to confirm longer-term support.
- We looked at GBP/AUD, and just below current price action is a very interesting zone of potential support between 1.6216 and 1.6266. Next week sees another RBA meeting, and should support show up in this zone, longer-term bullish GBP/AUD positions could become attractive.
--- Written by James Stanley, Strategist for DailyFX.com
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