Long-term outlook for GBP/USD remains tilted to the downside as the pair preserves the downward trend from back in August, but the near-term advance in the Relative Strength Index (RSI) may foreshadow a larger correction in the exchange rate as the oscillator threatens the bearish formation carried over from May.
SecureInvestment Speculative Sentiment Index (SSI) shows the retail crowd remains net-long GBP/USD since November 19, but the ratio continues to come off of the extremes readings from January as it narrows to +1.14, with 53% of traders now long.
Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
Interim Support: 1.3870 (78.6% expansion) and 1.4000 pivot.
As expected, the Bank of England (BoE) retained its current policy at its first meeting for 2016, with the Monetary Policy Committee (MPC) once again voting 8 to 1 to keep the benchmark interest rate on hold at 0.50%. Even though the BoE continues to highlight the bright signs coming out of the U.K. economy, persistent low energy prices may become a growing concern for Governor Mark Carney and Co. as the central bank now expects a more gradual increase in inflation that previously expected. There was a limited market reaction as we got more of the same from the BoE, but the sterling bounced back during the North American trade to end the day at 1.5229
