December 3, 2022
  • December 3, 2022

GBP offer on falling Covid alert level in UK and ahead of BOE’s Baily

By on May 11, 2021 0

The UK has lowered the alert level for the coronavirus to level 3 from level 4. This means that “the epidemic is in general circulation”. The level 4 alert included “transmission is higher or increasing exponentially”. Now that the level has dropped, PM Johnson has the green light to ease more restrictions (set for next week), such as allowing restaurants to serve indoors.

Last week the Bank of England announced it would keep monetary policy unchanged, but it also said it would slow the pace of bond purchases to £ 3.4bn £ 4.4bn per week. It may not be a change in monetary policy, but it is shrinking! BOE Governor Bailey has spoken a few times this week, but if he had any news on monetary policy he would have said so last week.

This is all good news for the great pound sterling. Reopening and shrinking! What not to like?

After rising from mid-September 2020 to February of this year, the GBP / USD pair corrected to a slight descending wedge, which failed to even reach the 38.2% Fibonacci retracement level of the highest. September 23 low to February 24 high. On Friday, the GBP / USD pair broke the upper descending trendline of the correction channel. Previously, the pair broke both the psychological resistance level of the round number of 1.40000 and the lower ascending trendline of the longer term channel at 1.4000. The next resistance level is at the February 24 high near 1.4218 followed by horizontal resistance at 1.4376 dating from April 2018.

GBP / JPY failed in the Head and Shoulders pattern

GBP / JPY has been moving higher since March 2020. In March and April of this year, the pair looked poised to reverse with a head and shoulder pattern. However, the model failed to play because the price could not break the neckline. The price has risen today and topped the April 6 highs at 153.42. The resistance above is at the 127.2% Fibonacci extension and 161.8% Fibonacci extension between the April 6 highs and April 23 lows at 154.60 and 156, 11 respectively. Above there is horizontal resistance at 156.61 since January 2018.

The horizontal support is at 152.42 then 150.93, ahead of the psychological support of the round number at 150.00.

GBP pairs are advancing well after last week’s BOE meeting and reopening scheduled for next week. The risk is that Bailey will say something conciliatory this week or that there will be negative news regarding the coronavirus. Watch for the headlines!