GBP/USD Rate: More Upside Potential
- Pound to Dollar Rate Today: 1.2737
- Dollar to Pound Rate Today: 0.7851
Pound Sterling remains within the supportive channel of a short-term uptrend against the Dollar.
Both the Pound and Dollar struggled at the start of the new week.
It would appear that both currencies have lost the support of rising bond yields which have for some weeks now kept the two currencies outperforming their rivals.
Because both the Dollar and Pound are performing badly it should come as no surprise that GBP/USD is in a bit of a stalemate and virtually unchanged on where it started the day.
Therefore, the gentle recovery run remains alive.
Sterling-Dollar has broken above the November highs and reached a peak of 1.2747 after disappointing earnings data from the US moderated the exuberance of Dollar bulls.
Recent days have shown strong bullish momentum and this suggests a continuation higher.
The MACD has breached its zero-line indicating a change to an uptrend on the daily chart.
There is now a strong chance of a continuation higher to the next target at 1.2800.
The R1 monthly pivot – a strong resistance level – sits at 1.2717, but it appears to have been breached.
A break above 1.2750 would confirm the break and probably see an extension to 1.2800. R1 would thereafter provide support.
Commerzbank’s Karen Jones is less bullish and more neutral in her view of GBP/USD.
“The charts continue to suggest that upside scope is limited," says Jones. “However, we are cautious as yesterday’s move looks quite directional."
Above 1.2674/1.2700 sits the 1.2798/1.2866 area, made up of the July and August lows and 23.6% retracement of the move down from 2014.
“This guards the more important 1.3446 5th September peak,” says Jones.
Latest Pound / US Dollar Exchange Rates
  | Live: 1.3336▲ + 0.07%12 Month Best:1.3789 |
*Your Bank's Retail Rate
| 1.2882 - 1.2936 |
**Independent Specialist | 1.3149 - 1.3203 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Dollar Stumbles on US Wage Hurdle
The steady appreciation in the US Dollar appears to have come unstuck of late largely thanks to the lacklustre earnings data held in Friday's US Jobs report - the aftermath could be a continued source of weakness for the Dollar in the coming five days.
Rising wages are indicative of rising inflation and the market had got its hopes up about inflation rising fairly rapidly to ‘normal’ levels following Donald Trump’s election victory.
The low earnings data, however, placed those expectations in doubt and the market may need to adjust further after getting ahead of itself.
Unless inflation starts rising at faster rates the propensity for the US Federal Reserve to raise interest rates remains limited, and it is the prospect of higher interest rates that will keep the Dollar bid.
Sterling, meanwhile, appears to be at risk of further appreciation as a chink of hope that the UK can stay in the single market has pulled up forlorn hopes.
The currency is very sensitive to soft Brexit commentary, and its possible we may get more in the week ahead after the possibility of the UK paying to remain in the single market was touted by ministers.
The story may have further to run and more details of a potential deal could push the Pound higher.
A victory for more anti-establishment parties of votes in Italy and Austria which both have elections on Sunday, December 4 could also support the Pound.
Europe is changing and the UK may not be the only country negotiating a different style of membership with the ‘club.
‘Not being alone’ could support its negotiation stance.
Technical Forecast For GBP/USD
Events to Watch for the Dollar This Week
Data out on Monday, December 5 at 15.00 (GMT), includes ISM Non-Manufacturing PMI which is forecast to rise to 55.3 in November.
Services PMI for November is also out on Monday at 14.45.
On Wednesday, December 7 at 15.00, JOLTS Job Openings are released for October
Events to Watch for the Pound This Week
A major release for the pound will be Services PMI for November on Monday, December 5 at 9.30 (GMT).
On Wednesday, December 7 at 9.30, there is the release of October Manufacturing Production.
Finally, on Friday, December 9 at 9.30, the Trade Balance for October is Released.
