Cable stands at the back foot on Thursday, ahead of BOE policy meeting, though the price action remains within larger 1.2263/1.2247 near-term range and lacking clearer direction.
Technical studies are mixed on daily chart, while warning comes from formation of reversal pattern on weekly chart after the action was repeatedly capped by falling weekly Ichimoku cloud base, though signal still needs more downside action to be verified.
On the other hand, fundamentals are expected to be pound’s main driver today, as markets shift focus on BOE policy meeting, after positive impact from dovish Fed on Wednesday was short-lived.
The Bank of England is widely expected to raise interest rate by 50 basis points to 4.0% (the highest since 2008) in the 10th straight rate hike, though tiny possibility that the central bank may opt for a smaller 25 basis points hike, should not be completely ignored.
The UK policymakers face two opposite forces, as core inflation is not easing yet while the economy is expected to enter recession and also not sure yet about the impact of their recent aggressive policy tightening that keeps in play the dose of uncertainty.
Today’s dip, in case of 50 basis points hike scenario, would likely offer better levels to enter long positions in anticipation of fresh strength on hawkish BOE (50 basis points hike / signals of further tightening / clear signs of end of steep rate climb phase).
Psychological 1.24 level marks initial barrier, followed by 1.2447 (Dec 14 / Jan 23 peaks / Fibo 61.8% of 1.3748/1.0348) break of which would signal bullish continuation and expose target at 1.2666 (May 27 high).
Conversely, sterling may lose ground if BOE opts for more conservative 25 basis points hike.
Res: 1.2355; 1.2402; 1.2447; 1.2490.
Sup: 1.2293; 1.2263; 1.2216; 1.2145.