BoE - Next in November

UK100, 30M up to Daily

The BoE left the repo rate at 0.25% and QE programs unchanged, as had been widely expected but while giving its firmest guidance in a decade that a rate hike is in the pipeline. The repo vote was 7-2, with MPC members Saunders and McCafferty both reprising their August votes for a 25 bp hike in the repo rate to reverse the post-Brexit “emergency” cut and return the repo to 0.5%. The BoE’s statement highlighted that while there has been relatively limited news on activity points on the economy since the August meeting, the available signs point to a “slightly stronger picture than anticipated.” The BoE notes a 40-year low in unemployment and survey evidence pointing to continued strength in the employment market, arguing for “continued erosion of what is now a fairly limited degree of spare capacity.” The statement notes that CPI is seen overshooting the 2% target over the next three years, and noted that the majority of MPC members judge that if prevailing trends persist, that some withdrawal of monetary stimulus “is likely to be appropriate.” Overall, the statement has put the focus on the November MPC meeting, when the next quarterly Inflation Report is due, as the likely venue for a 25 bp rate hike.

Sterling has surged nearly 1% in the in the wake of the BoE’s showstopper of a statement, where it gave its strongest guidance in a decade that a rate hike is in the pipeline. Cable clocked a high of 1.3337, while UK100 broke last week’s low at 7320. The UK100 is fluctuating within 7300.00 -7450 area since August 11, with 7445.00  be the 61.8 Fibonacci level in the Daily Chart. Therefore a retracement of the downtrend seen the last 3 days and especially on the intra-day sharp drop is expected.

A Long Entry was taken once the first 30M Bullish candles seen at 7327.5. Targets for hourly , 4-hour and Daily timeframe have been set based on ATR  (14) at 7340.00(H1) , 7350.00(H4),  and 7360.00(H4) , while the Daily on was set at the mid of the Fluctuation seen since August 11 which is at 7386.00(Daily).  Resistances for all 3 time-frames have been set at 7305.00 (H1) , 7300.00 ( H4), 7270.00 (Daily).