The focus is on the results of the central bank of England meeting at 7pm yesterday with an expected interest rate increase of 25 basis points to be implemented.
However, the Bank of England (BOE) surprised the market by raising interest rates by 50 basis points from 4.50% to 5.00%!
This follows the release of UK inflation data last Wednesday which remained at a high level at 8.7% missing forecasts for a slight decline.
The initial reaction after the results of the meeting, the Pound currency jumped for a moment before surprising by plunging again and trading gloomy throughout the New York session yesterday.
This can be seen on the chart of the GBP/USD currency pair with its initial surge after the BOE shock, reaching last week's high around 1.24800.
But right after that, the price continued to plunge again by more than 100 pips and started to move below the Moving Average 50 (MA50) level on the 1-hour time frame on the chart.
Investors began to worry about the risk of a UK economic recession following the BOE's aggressive actions causing the Pound to decline. However, if the BOE continues to raise policy, the Pound has the potential to strengthen again after this.
Continuing trading today (Friday), saw the price continue to show a decline in the Asian session heading back to 1.27000 to test the RBS (resistance become support) zone.
If the level fails to bounce back like last Wednesday, it is possible that the price could fall lower after breaking through it and head towards the target level at 1.26000.
A further drop lower is seen to reach 1.25000 and the price reaction in that zone will be watched by investors.
Meanwhile, if there is a rebound in the price after this, the price will try to cross the MA50 barrier before it can give an indication for a further increase.
The high level of 1.28400 reached yesterday will try to be reached again which was also the resistance level in last week's trading.
Next, successfully breaking through that resistance will push the price to reach the concentration level at 1.29000 while also breaking the latest record high since April 2022.
