As expected – and despite one or two commentators trying to grab the headlines by predicting a rise - the MPC kept interest rates at 5.50% in June. As usual, no explanation was given for the decision. The Committee did have a sneak preview of the May inflation figures, but this is unlikely to have been material in their decision. Instead the Committee (or at least the majority) are likely to have simply preferred to wait a month or two further in order to gauge the effects of previous increases in rates. The fact that rates were left on hold, however, increases the chances that they will remain so in July as well. Nevertheless, financial markets are still predicting a quarter-point hike by August and a further increase after that. The consensus expects the Committee to have voted seven-to-two, with external members Sentence and Besley voting for another quarter-point hike.

Here is a specific technical analysis concerning GBP/USD trend for today.

The buying point is at 1.9835; triggered by the continuation of an uptrend and failure to make lower bottom then the previous support of 1.9805. The market is in an up trend towards 1.9890.

- Fibonacci retracement at 61.8% is the take profit at 1.9890
- Fibonacci retracement at 38.2% represents the stop loss at 1.9768

The Standard error channel is important to understand the range of the market and break of the line will be the signal;
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of the two moving averages above the zero line, the shorter term moving average is faster than the long term and is pointing upwards with high volume. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine a bullish market and breaks the overbought area.

The zero line of the ROC (Rate of Change) is very important to understand the strength of the market and as we see on the graph; it bounce on the zero line and moves upwards. For the momentum oscillator we have to concentrate at the zero line and the trend of the oscillator. Most of the indicators show us the strength of the GBP against the USD and the continuation of an up trend.

* The following analysis is for information only; Finotec is not responsible for any
decisions or misinterpretations based on the given text.

By Finotec’s professional analyst,
Tony B.

dealingdesk@finotec.com