Yen up, pound down as market awaits Fed

The British pound is the weakest performer an hour into U.S. trade, falling more than 0.80% against the dollar. Fueling the decline was an increasingly dovish tone cited in the BoE minutes which were released overnight. Policy makers were unanimous in their decision to hold the benchmark rate at 0.50% with an 8-1 vote to leave the asset purchases at £200 billion. Adam Posen remains the sole dissenter on the stimulus, calling for the addition of £50 billion in purchases. The overall tone suggests that policy makers remain poised to implement further easing measures to support the faltering recovery.

Subsequently the pound has come under considerable pressure, breaking below the 100% Fibonacci extension taken from the April 27 and Aug. 19 crests at 1.5650 before finding support at the 1.56-figure. A break here risks substantial losses for the pound with downside targets eyed at 1.5540 and the 1.55-figure. Topside resistance now stands at 1.5650 with subsequent ceilings eyed at 1.5715, 1.5760, and 1.5820. The GBP/USD is likely to remain under pressure as the dollar continues its advance ahead of today’s FOMC announcement.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

1.6202

50-Day SMA

1.6190

20-Day SMA

1.5995

2011 GBP High

1.6745

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB: www.fxcm.com

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About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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