GBP/USD: high volatility is expected
Following rapid growth the pair GBP/USD has calmed down and consolidated at the level of 1.6100. Today’s sideways correction is the lull before the storm. Volatility will sharply go up after the announcement of the interest rate and volume of quantitative easing by the Bank of England. The data on the US GDP and labour market will be also released today. The decline of the gross domestic product by 0.5-0.6% will not be a surprise, while number of applications for unemployment rate is expected to reduce to 332 thousand.
Support and resistance
It is likely that negative US statistics will trigger the decline in the USD rate and the pair GBP/USD will get additional support. However, the rise in the GBP will be limited by resistance level of 1.6260 (recent local lows). In the medium-term the pair can reach the highs of 1.6260 and after that will go down to support levels of 1.5920 and 1.5880.
Indicators: MACD and Bollinger Bands confirm the forecast of downtrend. Despite increasing volumes, MACD histogram is still below the signal line. The price has pushed off from the average line of Bollinger bands and started to decline to its bottom line (1.5880).
Support levels: 1.6100, 1.6200 and 1.6260.
Resistance levels: 1.5920, 1.5750 and 1.5550.
In the current situation it is advisable to place short positions with profit taking at the level of 1.5750. Pending sell orders can be placed at the levels of 1.6200 and 1.6260.
Analyst of LiteForex Group of Companies