Yesterday, the Bank of England raised the interest rate once again by 25 basis points as was widely expected by market participants. The increase came in line with the forecast, so the current rate stands at 1.25%. However, there is one more factor that greatly influenced the trajectory of the pound yesterday. It seems that not all the members of the UK central bank share the same view on monetary policy. The fact is that only 6 out of 9 members of the Monetary Policy Committee voted for raising the rate by 25 bps. Others urged to hike the rate by 50 bps. This means that amid rising inflation, the BoE's officials may become more hawkish at the next meeting. Therefore, I won't be surprised to see the UK regulator lift the rate by 50 bps at its next meeting. However, this decision will largely depend on the intensity of inflationary pressures and the macroeconomic indicators. So, let's wait and see. And now let's proceed with the analysis of the GBP/USD chart.
Daily chart
Yesterday's trading was highly volatile which is quite natural amid such an important event. The long lower shadow of yesterday's daily candlestick indicates that the market was trading mixed. There was a fierce fight between the two market forces and, apparently, the bulls won. The initial pressure on the British pound stopped at the strong technical level of 1.2040. Moreover, this is where a rapid trend reversal took place, and the pound started to rise. Those who are not new to the market know how the pound can rise. Yet, the same can be said about its declines. As a result of a strong upward movement, the price broke through the red Tenkan line, the key technical level of 1.2300, and the blue Kijun line of the Ichimoku indicator located near 1.2300, at 1.2298. Apart from this, bulls managed to close the session on June 16 above the first Fibonacci retracement level of 23.6 in the descending area of 1.3642-1.1932.
As I mentioned yesterday, a deeper correction was possible under this scenario. The pound is very good at performing corrections. At the moment of writing, the pound/dollar pair is slightly declining which can be a possible pullback to the Tenkan line broken yesterday. It is very likely that the pair may find strong support at this level and reverse back to the upside. If this is true, then you can consider opening long positions from the red Tenkan line. This recommendation is mainly for those who are eager to open new positions at the end of the trading week. I assume that the main trading activity today will be around the level of 1.2300 where market participants will fight for the closing price of the day and week. If the pound bulls manage to close the weekly session above this mark, the odds of a further rise in GBP/USD will become much higher. On Monday, we will analyze the outcome of the weekly trade and see who was the winner.
Good luck!
