I`m sending this email to inform you of an interesting situation ahead of us in the GBP/USD pair.
As you may have heard, last week on the 6th of August, we had an interest rate decision in the UK which was followed by a brief announcement from the Bank Of England. They surprised by extending their quantitative easing program by 50 Billion GBP. As a result, the currency pair lost about 150 pips in a very quick move that started the current downtrend we see today.
The reason for the massive selling of the GBP leys in the fact that in order to purchase the aforementioned bonds the BOE would in fact have to increase it`s supply of the GBP. As you may know, when the supply of a currency grows, it tends to lose its value as inflation is anticipated.
Tomorrow we have a very important inflationary report released by the Bank Of England at 9:30 AM GMT which will be followed by Gov King`s speech. Many analysts believe that this report will suggest that previous estimates of rising inflation have been right and further decrease the pair`s value.
But it`s not only fundamental analysis that gives us this insight — we also receive support for this downtrend from pure technical aspects.
As you can see in the picture above, the strong uptrend move on the GBP/USD has started on march the 10th and was supported by the visible support line in blue. After the UK rate announcement and the move that followed it, the pair has convincingly breached through the support, indicating a possible strong downtrend.
As you know nothing is ever sure and I cannot guarantee it will all happen as I wrote above, but both technical and fundamental analysis show that the direction is downward for the next few days and even more.
I strongly recommend that you take advantage of this and open a short position on the GBP/USD.