The minutes of the last meeting of the Bank of England, which was released today, says that the inflation rate will increase considerably by the end of 2015. None of 9 members of the Monetary Policy Committee of the Bank of England spoke in favour of the lowering in the interest rate; at the same time the increase in the interest rate is going to take place gradually. In the period of February-April average wages in the UK rose by 2.7% against the forecast of 2.1%, unemployment rate has remained unchanged at the level of 5.5%.
In reaction to this data the Pound has grown against the major counterparts. Within one hour the Pound rose by 100 points against the USD and the price has reached the level of 1.5730. However, the key event of the day, which can add momentum to the movement in the USD till the end of the month or may be in the medium-term, will be the interest rate decision by the US Fed. Traders are also waiting for the press-conference of the US fed and a speech of Janet Yellen, the head of the US Fed devoted to the future monetary policy. If Mrs. Yellen does not specify the date of the interest rate increase or gives negative assessment of the state of the US economy, the USD can significantly weaken.
Support and resistance
If we look at the daily and monthly charts of the pair GBP/USD we will notice several typical levels and ranges. Important levels are 1.4400, 1.4600, 1.4900, 1.5000, 1.5100, 1.5230, 1.5400, 1.5600, 1.5800, 1.5900, 1.6200, 1.6300, 1.6700 and 1.7170. Since the mid-2008 we can outline a midline along which the pair has been moving.
On the daily chart the outstanding zone connected with ЕМА144 and ЕМА200, and the price levels of 1.5900 – 1.6200. After another surge of decline in the period of June 2014 to April 2015, from the level of 1.7170 to 1.4630, the pair is moving in the upward channel with the upper line at the level of 1.6200, which coincides with Fibonacci 61.8%.
On the daily chart the pair has broken down resistance levels of 1.5400 (ЕМА144), 1.5530 (ЕМА200) and 1.5600 (Fibonacci 38.2%) and is moving towards the levels of 1.5800 (this year highs) and 1.5900 (Fibonacci 50.0%). The indicator OsMA gives buy signal; Stochastic is in the overbought zone, confirming uptrend. The four-hour chart gives a similar picture.
Support levels: 1.5530, 1.5600 and 1.5655.
Resistance levels: 1.5800 and 1.5830.
Following the release of the British positive news, the Pound can continue to rise up to 1.5800 and 1.5900, provided that the US Fed does not specify the date of the interest rate increase. Be careful when making trading decisions. It seems preferable to open long positions from the levels of 1.5630, 1.5655 and 1.5700 with the targets of 1.5800, 1.5900 and 1.6200. Short positions with the targets of 1.5530 and 1.5400 can be opened after breakdown of the level of 1.5600.