GBPUSD Short-Term Retracement (June 16, 2016)

The pair appears to be making a correction, though, and applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with this area of interest.

In addition, the 100 SMA is below the 200 SMA and is also right around the broken support zone, adding to its strength as a potential resistance level. If it keeps gains in check, price could resume its drop to the previous lows near 1.4100 or lower. 

Stochastic and RSI are on the move up for now, suggesting that buyers are taking control of price action. Once these oscillators reach the overbought zone and turn lower, selling pressure could return. A break past the 1.4450-1.4500 handle, on the other hand, could signal an uptrend for GBPUSD.

Data from the UK has been mixed so far, with the CPI readings failing to show any gains in price levels and the jobs report coming in line with expectations. The average earnings index was better than expected at 2.0% instead of showing the estimated drop to 1.7%.

The BOE is set to make its monetary policy announcement today and no actual policy changes are expected. BOE Governor Carney is expected to have some remarks regarding the upcoming EU referendum and how a potential Brexit could affect the UK economy. Brexit polls will continue to affect GBP price action ahead of the vote on June 23.

As for the US dollar, the FOMC's decision to keep interest rates unchanged in their latest statement has spurred some weakness. After all, the Fed also downgraded growth forecasts for this year and the next, with the dot plot of rate hike projections showing fewer Fed officials expecting at least two rate hikes this year.

By Kate Curtis from Trader's Way