GBP/USD Eases Lower But Holds Within Broader Range

The pound to dollar exchange rate was volatile late last week after the Bank of England meeting. The initial statement released by policymakers revealed the interest rate unchanged and no alterations to the bond purchasing program.

However, a later speech from Bank of England Governor Andrew Bailey let the markets know that the BoE is not out of tools to ease policy further, paving the way for potentially more easing in June.

Bailey’s comments led to a decline in the exchange rate towards the same area that held the pair higher in April before buyers snapped the currency pair back up.

If the BoE were to ease further, they will likely increase the size of their bond purchasing program which two out of seven members voted in favor of at the meeting last week.

GBP/USD is weighed by a recovery in the dollar in early trading on Monday as the dollar index (DXY) has recovered back towards the 100.00 level to erase a bulk of the loss from late last week.

Volatility is likely to remain subdued in the session ahead considering the light economic calendar.

Technical Analysis

Rallies in GBP/USD over the past month have been stopped short near 1.2650 with the 200-day moving average creating a major hurdle.

To the downside, two declines were met by buyers following a test of 1.2270. While the currency pair has been mostly range bound since late March, price action over the past month has defined a clear range for the pair.

A break below 1.2270 would activate a double top pattern which carries a downside target of 1.1890. On the other hand, a break above the 200-day moving average would signal a bullish continuation in the upward trend that started in March.

GBP/USD was last seen dipping below a horizontal level at 1.2368. This level can act as a line in the sand for a directional bias in the session ahead.

Bottom Line

• GBP/USD continues to hold within a broader range and has been moving higher from range support since Thursday.
• Volatility is expected to slow in the session ahead considering the light economic calendar.