Review and dynamics
Yesterday, the Bank of England has lowered interest rate and expanded incentive program to stimulate British economy. The pair GBP/USD fell by 1.7%, losing almost 220 points. The price returned to the range of 1.3060 and 1.3365 (Fibonacci 23.6% to the decline after the announcement of the referendum results), where the pair GBP/USD has traded during the month.
The decline in the pair was not too dramatic as the decision by the Bank of England was expected and incorporated into the price. Moreover, the stimulus package adopted by the Bank of England on Thursday has been criticized by the authorities of the Central Bank for its excessively large scale and emergency. Some members of the Monetary Policy Committee of the Bank (MPC) were against some of the adopted measures.
It is likely that now, the Bank of England may now refrain from taking further incentive measures for some time in future. This fact can provide support to the pound.
With the opening of today's trading day the pair GBP/USD has been rising. Investors focus their attention on the US labor market data, which will be released today at 15:30 (GMT+2). In case of weak data, the USD and the pair GBP/USD will be under pressure. The pair GBP/USD may experience short-term upward correction.
In case of breaking out resistance level of 1.3365 and consolidation of the price above the level of 1.3400 (ЕМА200 on 4-hour chart) the pair GBP/USD may continue to rise up to levels of 1.3630 (lows of 2009, 2001, the closing price of “black Friday") and 1.3655 (Fibonacci 38.2%).
If the price consolidates below $1.3060 the pair may continue to decline.
Further movement in the pair will depend on actions of the US Fed and the Bank of England and economic data of the UK and the USA.
On the weekly and monthly charts the indicators OsMA and Stochastic give sell signals; the indicators on the weekly chart give signals for short positions.
On weekly chart the pair GBP/USD is in the descending channel with the lower limit near the level of 1.2600.
Difference in the monetary policies of the bank of England and the US Fed and expectations of economic recession in the UK in 2017 will put pressure on the Pound and on the pair GBP/USD.
It is likely that the pair GBP/USD will decline in the medium-term.
Support levels: 1.3130, 1.3060, 1.2900, 1.2800 and 1.2700.
Resistance levels: 1.3300, 1.3365, 1.3440, 1.3500, 1.3630 and 1.3655.
Sell Stop: 1.3090. Stop-Loss: 1.3140. Take-Profit: 1.3060, 1.2900, 1.2800 and 1.2700.
Buy Stop: 1.3160. Stop-Loss: 1.3110. Take-Profit: 1.3300, 1.3365, 1.3440, 1.3500, 1.3630 and 1.3655.
Correction to 1.3300 is possible
Meanwhile, the pair is moving in the range