Can GBP/USD Reach $1.35 in February?

The GBP/USD has surged higher today after Bank of England (BoE) members voted 7-2 to keep rates unchanged, which surprised investors, who were expecting a more closer voting score. As a result, the sterling gained nearly 1% against the dollar today.

Fundamental analysis: BoE less dovish than expected

Bank of England left the key interest rate unchanged at 0.75% in their January meeting with only two members voting for a rate cut. Investors were expecting more hands in favour for the rate cut following dovish statements in the previous weeks.

Governor Carney also boosted the pound when he noted that “near-term uncertainties facing businesses and households have receded”. Moreover, the BoE removed the guidance about future hikes, which described them as “limited and gradual”. 

We will also see how the sterling will react tomorrow in what could very well be a historic day. Tomorrow, the 31st of January, will be the last day the United Kingdom is a member of European Union, after the European Parliament overwhelmingly backed the terms of the UK's departure from the EU today.

Technical analysis: Approaching key short-term resistance 

The sterling erupted more than 100 pips higher on a less dovish Bank of England monetary policy statement. From the technical perspective, today’s move is important since the bears were on the brink of breaking a wedge and potentially opening the door for a move to $1.2850.

On the contrary, the pound looks well-positioned to now test the wedge resistance at $1.3150 as intraweek resistance. A weekly close above $1.3170 would pave the way for a test of the election high above $1.35.

Given the positive momentum after the BoE meeting, we wouldn’t be surprised to see the pound trading in the mid $1.35s. On the way to $1.35, the sterling faces important resistance levels, such as $1.3220 and $1.33. If you are looking to buy GBP, the chart suggests waiting for a potential break of the wedge resistance. 

Summary

The BoE released a less dovish monetary policy statement which launched the sterling to $1.31. The pair looks well-positioned to continue marching higher with $1.35, seen as a major mid-term target for the bulls.