Can the dip to the midpoint find the buyers
The GBPUSD shot up on the surprise vote by Kristin Forbes to tighten by 25 bps at today's BOE meeting. The price moved up to a high of 1.2371 - the highest level since March 1st. Remember, the GBPUSD was lower on 11 of 13 days. That move took the price from a high of 1.2569 to 1.2108 (on Tuesday). The last two days has seen more than 50% of that move retraced (see daily chart below).
On the BOE action today, the price moved above the 50% at 1.23387. As mentioned the high reached 1.2371. The correction lower has just come down to 1.2336 - just below that 1.23387 level. We currently trade at 1.2342 (see hourly chart below).
Has the correction lower run its course?
This is a key test. Hold it and the bulls still feel confident. The sellers/shorts are not so happy. We could see another leg higher and test of the next topside targets at 1.2383 and perhaps 1.2393-04 where there is a cluster of resistance including the 61.8%, the 200 bar MA on the 4-hour chart AND the key 100 day MA. I would expect that area would be a tough nut to crack on the first test at least.
Move below the support is not the end of the world - maybe we go to 1.2314-28, but the buyers lose some of the battle AND it could snowball too if the buyers don't show up at the lower support levels.