GBP/USD Falls Sharply As A Result Of Comments By BOE’s King

The GBPUSD fell overnight on the back of comments from BOE’s King saying that he would consider lowering the rate the Bank pays institutions for deposits with the central bank in order to spur on more lending.

Although he shied away from adding more quantitative easing measures, the market may think the possibility of increased government purchases might be considered given the worry about lending.  Additional QE measures have the effect of increasing the lending ability of the UK banks.

The GBPUSD has fallen from a high of 1.6658 to a low of 1.6451 so far.  In the process the pair moved back below the 1.6589 level (it paused at the level earlier).  The price also fell through the 100 and 200 hour moving averages at the 1.6600 level and 1.6496 respectively.

Finally, the pair broke through the trendline support at 1.6543.  Needless to say, the move has done some technical damage to the downside.

On the downside, the next target for the pair comes in at the 50% retracement of the move up from the September 2nd low. That level comes in at the 1.6425 level.

On the upside, the pair will be watching the 1.6496 to 1.6507 level for good resistance.  This level is where the 200 hour MA is located, the 38.2% retracement (at 1.6500), and the the 200 hour MA on the 4 hour chart (at 1.6507).  A move above this level will next target resistance at the 1.6530 level.

As long as the price can now remain below this level a move toward the 1.6425 level is more likely.

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