GBPUSD is consolidating inside an ascending triangle pattern on its 4-hour chart ahead of today’s event risks. Price just bounced off the bottom of the formation and may be due for another test of resistance around the 1.5650 minor psychological mark or even an upside break.
Stochastic is still on the move up, indicating that there’s enough bullish momentum to trigger an upside breakout. This could start a 300-pip rally, which is roughly the same height as the triangle pattern. On the other hand, a downside break below the triangle support around 1.5550-1.5600 could mean losses of at least 300 pips.
The moving averages look ready to make an upward crossover, which might confirm that further gains are possible. However, if the indicators keep moving back and forth, it could also be a signal for more consolidation.
The main event risks for this setup are the BOE interest rate statement, MPC minutes, and Inflation Report hearings. BOE Governor Carney is also set to make a testimony much later on, during which he could reiterate that they’re considering monetary policy tightening already.
Recall that Governor Carney said that they’re moving close to hiking interest rates during their previous Inflation Report hearings and a couple of monetary policy committee members probably voted to increase the benchmark rate by 0.25% in the previous policy meeting.
If so, GBPUSD could go for an upside break on hawkish expectations, especially if the US jobs report turns out to be a disappointment later this week. Keep in mind that the ADP report missed expectations while the employment component of the ISM manufacturing PMI showed a decline, increasing the odds for a downside NFP surprise. This could convince market watchers that the Fed might hold off any rate hikes this year as they wait for further improvements in the jobs market.