After days of consolidation, GBPUSD finally broke out of its symmetrical triangle. The currency pair pushed past resistance around 1.2860 and rallied to tap an intraday high at 1.2887. It finished the day 44 pips higher from its open price at 1.2880.
On the economic front, data from the UK failed to top forecasts. UK retail sales report for the month of October showed that consumer spending declined by 0.1%. The figure disappointed market consensus which called for a 0.2% uptick. Core retail sales also printed a negative reading of 0.3% versus the consensus of 0.2% growth. Year-on-year, consumer spending is up by only 3.1% and missed the 3.7% estimate.
The upside break on the currency pair was largely due to broad dollar weakness yesterday. Yields on US 10-year Treasury bonds bonds dropped to their lowest level since November 7 at 1.80%. This then dampened the demand for the US dollar which benefited the British pound.
Looking at the hourly time frame, it looks like there’s more upside potential for the currency pair. GBPUSD is trading within a tight 11-pip range since last night after it rallied sharply. This is what many would consider a bullish flag. If you also remember, the area around 1.2878 coincides with the inverse head and shoulders chart pattern I pointed out earlier this week.
A strong bullish close above yesterday’s highs at 1.2887 could mean that the currency pair would soon find its way at 1.2915 where it found resistance on November 5.
On the other hand, a stronger dollar in today’s trading could seng GBPUSD to test support at the 100 SMA and 200 SMA at 1.2846.xDownload our latest quarterly market outlookfor our longer-term trade ideas.
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