The GBP/USD pair is trading in the green at 1.2264 at the time of writing. The price action invalidated more declines and now it seems determined to approach and reach new highs as the Dollar Index dropped and GBP was boosted by the BOE.
Today, the BOE increased the Official Bank Rate from 1.00% to 1.25% as expected. 3 MPC members voted for a 50bps rate hike which could be bullish for the British Pound. On the other hand, the US Unemployment Claims came in at 229K above 215K expected. Philly Fed Manufacturing Index dropped from 2.6% to -3.3 even though traders expected a potential increase to 5.1 points, while Building Permits and Housing Starts reported worse than expected as well.
GBP/USD Rally
As you can see on the H1 chart, GBP/USD registered a false breakdown with great separation below the uptrend line and through the weekly S2 (1.2110), signaling strong upside pressure.
Ignoring the 1.2165 and 1.2208 upside obstacles activated a larger leg higher. Still, after its strong rally, we cannot exclude a minor retreat of consolidation above the broken levels.
GBP/USD Forecast
Breaking above 1.2208 and making a new higher high indicates an upside continuation in the short term. Consolidating above 1.2208, testing and retesting this broken resistance level could bring new buying opportunities with a potential upside target at the 1.2400 psychological level.
Only a valid breakdown below the uptrend line may signal that the leg higher ended and that GBP/USD may develop a strong sell-off.
