GBPUSD Taps 7-Month Highs on Risk Appetite and Negative Forex News from the US
The British pound scored the biggest gains against the US dollar among the major currencies yesterday. GBPUSD opened at 1.2986 and steadily traded higher to an intraday high if 1.3119 which is the highest level that the currency pair has reached in seven months! By the end of the New York session, GBPUSD had settled at 1.3102.
A Phase One Deal to Happen Soon?
Risk appetite picked up during the European session yesterday. A report from Bloomberg said that the US and China were close to finalizing a phase one deal. This was contrary to earlier statements by US President Donald Trump who said that he was not in a hurry to strike a deal with China. People close to negotiations had also said that the President was extra critical of details. He wanted to make sure that the US did not want to be on the losing end of a deal. However, the report from Bloomberg eased market sentiment when it said that a phase one deal could be finalized before the December 15 deadline.
Disappointing ADP and ISM Non-Manufacturing PMI Reports
The rally on GBPUSD was also fueled by worse-than-expected data from the US. The ADP report which aims to predict the official government-produced non-farm payrolls, printed at 67,000. It was predicted to come in at 137,000. On top of it, the ISM non-manufacturing PMI report printed at 53.9. It disappointed the forecast which was at 54.5.
Meanwhile, on the domestic front, the final services PMI for November topped forecasts. It printed at 49.3 versus the 48.6 forecast. Although the figure is still below the 50.0 baseline reading, the improvement from October’s reading of 48.6 suggests that the services industry is close to expanding again.
UK Poll Results to Dictate Direction
There are no top-tier data due from the US and the UK today. This probably means that GBPUSD will take its cue from market sentiment or news on UK poll results. The pound has benefitted from news that Conservatives lead ahead of Labour in the upcoming December 12 elections. If polls suggest that Boris Johnson and the Conservatives will secure majority, the pound could rally even further.
If there are enough buyers in today’s trading, the next resistance level for GBPUSD to test will be its March 10 highs around the 1.3300 psychological handle.
On the other hand, if sellers dominate today’s trading, we could see the currency pair pull back, Using the Fibonacci retracement tool and drawing from the low of November 27 to yesterday’s high, GBPUSD could retrace some of its gains to the 50% Fib level. The area around 1.2968 is also a previous resistance level from November 15 to November 21.Download our latest quarterly market outlookfor our longer-term trade ideas.
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