GBPUSD moves back toward 61.8% retracement of 2022 range ahead of FOMC/BOE rate moves

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  • 1.24507 is the 61.8% retracement
GBPUSD sets up for the FOMC/BOE

The GBPUSD is moving to a new day high and in the process is moving closer to the 61.8% of the 2022 trading range. That range had a high in the beginning of January at 1.37479, and a low on September 26 at 1.0352 as new PM Truss was making her budget blunders that led to her resignation on October 20 after 44 days in office. The 61.8% retracement of the year's trading range comes in at 1.24507. The high price yesterday reached 1.2443 just 7-8 pips short of that target.

Looking back at the rally from the lows this year, the move to the upside breached the 100 day MA (blue line on the chart below) at 1.16639 on November 10. The higher 200 day moving average (green line) was broken on December 1 at 1.2153 (it is currently at 1.21074). Although the price dipped breifly below the 200 day moving average on December 6 and December 7, the price did not close below that moving average keeping the buyers in control.

Looking at the daily chart there is a swing area between 1.22787 to 1.22436. The price moved above that swing area yesterday on its way to the test of the 61.8% retracement. Today the low price came in at 1.2341 just 2-3 pips below the high of the swing area. Support buyers leaned against the level, and have pushed the price back above the 1.2400 level. The current price trading at 1.2414 after reaching a high of 1.2421.

So overall, the the buyers continue to make the advancements and remain in more control.

Through the FOMC rate decision, the swing area between 1.2343 and 1.22787 will be risk defining levels on the downside. Move below each of those levels increases the short term bearish bias. A move below the lower 1.22787 could lead to disappointment from buyers looking for more upside into the year end. Falling below could shift buyers to sellers and lead to a rotation back toward the 200 day moving average at 1.21074.

Alternatively, a move above the 61.8% retracement would increase the bullish bias, and have traders targeting the swing area going back to April, May and June between 1.2598 and 1.26653.

Taking a broader look at the weekly chart, the price moved above the 50% of the move down from the 2021 high at 1.2296. That is between the swing support area on the daily chart. Move back below it and then the 1.22787 would be an additional reason to hurt the bullish bias in the short term at least.

GBPUSD above the 50% midpoint of range since 2021 high

The BOE will announce their rate decision tomorrow at 7 AM ET. The expectations are for a 50 basis point hike to 3.5% which is down from the 75 basis point at the last meeting. At the last meeting there was some dovish dissent from Dhingra and Tenreyro who wanted a 50 and 25 basis point hike. Tenreyro has commented that she things the BOE has done enough. So there are the expectations for a more dovish hike. Growth going forward is expected to worsen. Inflation peaked at 11.1% (or so it seems). The CPI came in at 10.7% today which was lower than the 10.9% estimate.

Trading analysis offered by Flex EA.