The GBPUSD has dropped to its lowest level of the week today following dovish comments from Bank of England (BoE) Governor Carney in which he ruled out a rate hike. The market has been sensitive to several major event lately with the UK General Election, Fed rate hike, BoE and now Carney’s speech all seeing volatile moves.   

 

  The GBPUSD has been event driven lately with the UK election and Fed and BoE causing significant moves

Overall the market does seem to be weakening though and whilst price remains below the recent resistance at 1.2820 there appears to be a bear flag formation in play. A daily close below 1.2633 would confirm a break lower with 1.2515 and 1.2415 levels to watch for possible support on the downside. Alternatively, a daily close back above 1.2633 could see the market attempt a recovery but its not until price has breached 1.2820 to the upside that the bear flag setup will be negated. The high on the day of the General Election at 1.2976 would then become a level to keep an eye on. 

Despite the fall in GBP today the UK100 has come under pressure too with the inverse correlation failing to hold. The UK100 rallied early on to trade back near 7500 but an inverted hammer on H4 signaled a reversal. The high near 7495 has previously been a decent swing level and whilst price remains below here further declines remain possible. The 8 and 21 period EMAs on H4 are in a bearish orientation (8 below 21) and if price continues to decline the double bottom at 7370 could be tested once more in the not too distant future. 

 The UK100 rejected a prior swing level earlier today and the market could be set to retest the double bottom at 7370