Is Cable’s fall from 1.4346 to 1.3838 a blessing in disguise for BOE? How is GBPUSD currently trading? Find out on the 8 February GBPUSD Technical Analysis.
8 February, GKFX – The Bank of England (BOE) will release a triple whammy of data today – the interest rate decision at 12:00 GMT, minutes from the monetary policy committee (MPC) meeting and the quarterly inflation report. Billed as “Super Thursday”, the event usually has a long-term impact on GBP/USD.
To start with, the options market has regained a strong GBP bearish bias this month. For instance, one-month 25-delta risk reversals are being paid at 0.725 GBP puts compared to 0.35 GBP calls two-weeks ago.
Risk reversals show strong downside bias
Also, overnight 25 delta risk reversals have dropped to -2.40 (are being paid at 2.4 GBP puts) – the lowest level since June. Clearly, the options data indicate the investors are hedged against/positioned for a further decline in the GBP/USD pair.
That said, the recent drop in the GBP/USD from the post-Brexit referendum high of 1.4346 (Jan. 25 high) to 1.3836 (Feb. 6 low) has created room for the BoE to deliver a somewhat hawkish message along with status quo decision on the rates, Reuters report says.
The pound may rise sharply if the BOE’s quarterly inflation report sounds hawkish. In such a scenario, investors would be forced to unwind long puts, thus leading to an exaggerated move to the upside.
8 February GBPUSD Technical Analysis
As of writing, the spot is trading just below 1.34. The 5-day MA and 10-day MA are trending lower, having seen bearish cross earlier this month. So the short-term set up is bearish.
A break above 1.3980 (Jan. 30 low) would expose the 10-day MA (now) seen at 1.4062. A close higher would signal bearish invalidation and open doors for 1.4278 (current month high). On the downside, breach of support at 1.3836 (Feb. 6 low) could yield a drop to 1.3797 (61.8% Fib R of Jan. 11 low – Jan. 25 high). A close lower and Pound could soon fall into troubled waters near 1.3666 (50-day MA).
This article 8 February GBPUSD Technical Analysis was written by analysts at GKFX. The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.
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