GBPUSD Elliott Wave Analysis Ahead of BOE Meeting

GBPUSD trades around 1.29 ahead of Thursday’s BOE meeting. The following looks at the technical side based on Elliott wave theory.

February 07, 2019 | AtoZ Markets – Sterling is at its lowest in two weeks after slumping to 1.29. Brexit is still a major concern and poses a big risk to the future performance of this currency. UK PM May meets EC President Juncker to find a way around the Brexit stalemate. Today, the Bank of England will release its latest inflation reports and rate decisions. Market will read into and react on any dovish or hawkish statements or forecasts especially one that includes Brexit.

GBPUSD has dropped quickly this month from 1.31 to 1.29. The current drop is the biggest, following the rally from 1.237 to 1.32 which started on 2nd January and oversaw a 6.5% rise in price. Yesterday, price dropped below 1.3 for the first time in two weeks and has remained below it today with the BOE meeting coming in less than an hour time. What are the technicals saying?

GBPUSD Technical Analysis and Important Price Levels

A large inverted head and shoulder pattern is emerging. Though there is still one more leg to go to complete this pattern but it’s worth noting. At 1.2375, price completed a wedge pattern. The last leg of the wedge was so fast after the MPs rejected PM May’s Brexit deal in the last House of Commons votes. The result was overwhelmingly expected and the market quickly priced in after a flash down. The wedge pattern completed immediately after the Brexit flash down at 1.2375 but price bounced upside to 1.322 in the weeks that followed. The inverted head and shoulder pattern is emerging. The first shoulder ended at 1.265 while the head ended at 1.2375. The second shoulder might dip close to 1.265 followed by a break above 1.322.

If today’s BOE meeting came as a surprise with hawkish tones,a big bullish move above 1.322 could happen to confirm the pattern and send the Sterling further upside. The market expected a rate slash. If that happens, a dip toward 1.265 should be seen to complete the second shoulder. Market is expected to be priced in later and the bullish forces resume the rally which started at 1.2375.

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