BOE extension of Asset Purchase Program hurts the pound
The BOE extension of the Asset Purchase Program by 50 billlion pounds has caused a sharp drop in the British Pound. The Central Bank comments say the world economy is still in a recession. Nevertheless, the household and business confidence has picked up. They cited that capacity is in the economy is likely to grow and that the UK recession was deeper than previously thought. They still see the restrictive credit as banks continue to repair their balance sheets. The asset purchase program should take 3 months to complete.
The GBPUSD gapped lower off the news release. The pair has plunged back below the key 1.6950 level, and the 100 hour MA for the first time since moving above the moving average at the 1.6443 level on July 30th. The 100 hour moving average comes in at the 1.6878 level and this level should act as resistance on corrective moves to the upside today.
On the downside, there is trendline support that comes in at the 1.6798 and below that the 38.2% retracement support comes in at the 1.6772 level. A high level from August 3rd reached 1.6776 so the area has a few reasons for holding at the level.
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