Ready for the BOE’s Super Thursday? Here’s a breakout setup if you’re planning on trading the pound this week!
If you’ve read Forex Gump’s article on “Super Thursday,” then you should know that the Bank of England (BOE) is gearing up to release its monetary policy decision, Monetary Policy Committee (MPC) meeting minutes, and inflation report…today!
According to Forex Gump, forex market players aren’t expecting any changes to the BOE’s policies. However, all eyes could turn to the inflation report, as it could hint at where the central bank’s biases are leaning towards. Further downgrades of inflation expectations could fuel speculations that the BOE isn’t ready to raise its rates just yet.
The hesitation over the BOE’s biases can be seen from GBP/USD’s chart. The pair is forming what looks like a descending triangle on the 1-hour time frame. Triangles usually represent consolidation ahead of a breakout and descending triangles tend to break to the downside. Of course, it’s also not unheard of that the triangle could lead to an upside breakout. In fact, the “triangle” could very well be a bullish pennant, a continuation pattern, if traders draw their lines right.
I’m also on the fence on Cable’s next moves though I’m leaning towards more weaknesses for the pound. After all, Janet Yellen recently stoked the fire on a possible December rate hike by the Fed and it would be easier for GBP/USD traders if the BOE turns out to be more dovish than expected today.
A short below the triangle’s support could make for a good trade if it breaks lower and I place my stops above the 1.5400 handle. Maybe a target at around 1.5250? I’m only risking 0.25% of my account on this one since it’s a short-term trade. If Cable pops up after today though, then I’ll also contemplate on jumping on the trend and possibly entering at an SMA retest.
What do you think? Which way will the pound trade for the rest of the week?