British Pound Posts Strong Rally after Testing 50% Level

The British Pound rebounded against the Dollar afterrecovering from a sharp sell-off on Tuesday into a key 50% price level at1.5974. Additional support was provided by an uptrending Gann angle at 1.5950.

The British Pound rebounded against the Dollar afterrecovering from a sharp sell-off on Tuesday into a key 50% price level at1.5974. Additional support was provided by an uptrending Gann angle at 1.5950.

This angle moves up to 1.5970 on Thursday, making 1.5974 to1.5970 a major support cluster. A break below this set-up is likely to attractselling pressure that could fuel a decline into the Fibonacci level at 1.5987.

On the upside, the market rallied into the retracement zoneat 1.6125 to 1.6165 created by the short-term range of 1.6298 to 1.5951.

The catalyst behind today’s rally was the Bank of England’sassessment of the U.K.inflation situation. The Sterlingbegan to rally early in the session after the Bank of England said inflationmay continue to accelerate above its 2 percent target, reducing the chancesthat the central bank will reignite asset purchases.

Based on today’s trading action, it looks as if the BoE’s“wait and see” monetary policy approach is not likely to change until thecentral bank gets a chance to assess further economic releases. This may meancontinued strength in the Cable especially if the Euro remains under pressurebecause of sovereign debt concerns and the U.S. economy continues to falter.