UK Manufacturing Data Helping the Sterling Remain Resilient

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UK Manufacturing Data Helping the Sterling Remain Resilient

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.

GBP/USD 4H Chart 12/1
gbpusd 4h chart 12/1
(click to enlarge)

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
Forecast: 53.1
Previous: 53.3
uk manufacturing
(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.

GBP/JPY 4H Chart 12/1
gbpjpy 12/1
click to enlarge)

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.

EUR/GBP 4H Chart 12/1
eurgbp 4h chart 12/1
(click to enlarge)

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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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.