Sterling remained on the back foot last week, price met renewed selling pressure at 1.3565 (Mon) n fell to 1.3436. Despite a rebound to 1.3525 (Wed), cable tumbled after Fed's hawkish tilt n later hit 1.3359 Thur.

On the bigger picture, despite cable's brief break of 2016 post-Brexit low of 1.1491 to a near 35-year trough of 1.1412 in mid-Mar 2020 on safe-haven USD's demand following free fall in global stocks, price rallied to 1.3686 on the last trading day of 2020 following a last-minute EU-UK trade deal, then to a near 34-month 1.4241 peak in late Feb suggests a major low is made. Despite hitting a 3-year peak of 1.4250 on Jun 01, a selloff to as low as 1.3162 in Dec signals long-awaited correction has occurred. Having said that, cable's impressive rally to 1.3749 in early Jan confirms temp. low made, however, last week's sell-off to 1.3359 signals correction possibly over, below 1.3274 would yield 1.3162.

Today, cable's drop to Thur's 4-week 1.3359 low signals correction FM 2021 Dec's 1.3162 bottoms has ended n Fri's recovery to 1.3432 would bring range trading b4 down, 'bullish convergences' on hourly indicators would prevent steep fall below 1.3303. Only abv 1.3432/36 risks 1.3475/85 but 1.3525 should hold.

On the other hand, expectations that the Bank of England will hike interest rates at its meeting on Thursday underpinned sterling and provided an additional boost to the GBP/USD pair. Bulls, however, seemed reluctant ahead of the report into alleged lockdown-busting parties at Downing Street, expected to be released later today.

All Eyes on BOE Interest Rate Decisions

Jan 31 2022