BOE vote could trigger further Sterling weakness – OCBC

Pound Sterling (GBP) weakened overnight after softer-than-expected CPI data, with technical signals hinting at a possible reversal. Market attention turns to today’s BOE meeting and committee vote, which could drive further downside. Pair was last at 1.3357 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Rising wedge pattern signals possible bearish reversal

“GBP fell overnight on softer than expected CPI prints. Bullish momentum on daily chart intact but shows tentative signs of fading while RSI eased lower. Rising wedge pattern appears to be forming – typically associated with bearish reversal. Some downside risk is not ruled out.”

“BOE MPC may be one trigger, the other being USD, owing to CPI releases. For BOE, we would pay close attention on the committee voting. At the last November meeting, committee voted 5-4 to cut rate. A similar split is expected today based on Bloomberg survey. A more dovish shift may be a potential trigger for GBP downside to play out.”

“Support at 1.3350 (200 DMA, 23.6% fibo retracement of Nov low to Dec high), 1.3290 (21 DMA, 38.2% fibo) and 1.3255 (50 DMA). Resistance at 1.3460 (Dec high), 1.35 levels.”