GBPUSD Uptrend Correction (Dec 07, 2016)

Cable has been trending higher recently, moving inside an uptrend channel visible on its 1-hour chart. Price just hit the top of the channel and is showing signs of a pullback to support at the 1.2500 major psychological support.

Applying the Fib tool on the latest swing low and high shows that the 61.8% retracement level is closest to the channel support and lines up with a former resistance area. This could be enough to keep losses in check and allow price to head back to the swing high or until the channel resistance at 1.2800.

The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, the 100 SMA lines up with the channel support, adding to its strength as a floor. Stochastic is on the move down to show that bears are in control of price action for now but the oscillator is already nearing the oversold zone.

UK services PMI came in stronger than expected earlier this week, keeping investors confident that the economy is staying afloat even with Brexit uncertainties. Manufacturing and industrial production numbers are due today and 0.2% gains are eyed, with stronger than expected data likely to lift Cable higher: 

Only the JOLTS job openings report and consumer credit data are up for release from the US today while initial jobless claims are due on Thursday and preliminary UoM consumer sentiment index is scheduled for Friday.

There are no other top-tier reports set for release from the UK in the next few days so Brexit-related headlines and even euro zone political updates could influence pound price action for the rest of the week. 

By Kate Curtis from  Trader’s Way