GBPUSD has been stuck in a range on its 1-hour time frame, as the pair found support at the 1.5600 major psychological level and resistance at the 1.5750 minor psychological mark. 

Price recently bounced off the bottom of the range and is currently testing the top.

Weaker than expected UK CPI wasn’t enough to trigger a downside break from support yesterday, as pound traders are still probably waiting to see the BOE meeting minutes due today. Also up for release are the UK jobs figures, which could reflect another pickup in employment.

Take note that a bullish flag appears to have formed right on the top of the range, hinting that a continuation of the rally might be in order. Stochastic is moving lower though, which suggests that bears are in control of price action for now.

If the top of the range holds as resistance, GBPUSD could move back to its previous lows around the 1.5600 mark. Depending on how the events turn out, a downside break might be possible. This could lead to a 150-pip selloff, which is the same size as the rectangle range pattern.

A bounce could lead to a move back to the top of the range, with a potential upside break likely to last by another 150 pips as well. This scenario might take place if the BOE minutes remain hawkish, despite the recent downturn in inflation and the onse of risk aversion in the financial markets.

As for the US dollar, the FOMC statement is also a huge event risk for this trade, as the Fed is expected to drop the “considerable time” phrase in discussing how long rates might stay low even after easing has already ended. A relatively upbeat statement could mean extended gains for the dollar, which is already benefitting from the flight to safety in the past few days

By Kate Curtis from Trader’s Way