Last week, GBP/USD popped up from a consolidation range roughly between 1.5585 and 1.5737. Price came up to a previous support area around 1.5825 and retreated, falling all the way back to the range’s 1.5585 support ahead of UK Manufacturing data. The UK data also helped the sterling remain resilient against the JPY and EUR.
Once again, as we begin the week, price tested an rallied from the 1.5585 area. The 4H bullish candle engulfed all of Friday’s price action and more, and puts cable back at the previous range resistance around 1.5737. The strength of this candle suggests another round of consolidation in the short to medium-term.
From a fundamental perspective, today’s UK manufacturing data may have helped cable hold above the November and 2014 low.
UK Manufacturing PMI (November): 53.5
(click to enlarge)
As we can see from the historic chart, manufacturing data in the UK have stabilized in the past couple of months holding above the 50.0 expansion/contraction level. Forecasts called for a decline to 53.1, and instead rose above October’s reading of 53.3 to 53.5 in November.
We are also seeing the pound strengthen against the Japanese yen, which is actually clawing back some gains to start the week. In the 4H chart, we are essentially seeing a bullish market that has consolidated in an ascending triangle. UK manufacturing data is helping GBP/JPY bounce off the 50-period SMA at 185.00 to threaten a bullish continuation around 186.07. The width of the triangle consolidation was about 200-pips. A break above 186.07 thus opens up the 188-188.10 area using a consolidation breakout projection.
A this point, a break below 185.00 will be needed to suggest a consolidation or bearish correction.
The EUR/GBP also made an about face in favor of the pound after the manufacturing data. The 4H chart shows that price has held above 0.79 last week after a dip, but is now poised to retest this support. A break of 0.79 first opens up 0.7860 level (previous resistance), then the 0.78 low.
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