Higher-than-expected producer price index released Friday morning in London helped GBP/USD break above the key 1.5838 resistance to a 2-week high and is now targeting the 1.5952-1.5996 region.

Above that, the pair could target 1.6104 (R2) before retesting 1.6297 (R3), the 10-month high hit early November. GBP/USD was at 1.5835 as of 12:05 GMT, after rising as high as 1.5860, its highest since November 23, and from Thursday's close of 1.5767.

The price index rose 3.9 percent year-on-year in November against market expectations of 3.5 percent rise and little changed from 4 percent rise in October, Britain's National Statistics said.

On the bigger picture, rally from mid-May low of 1.4227 is continuing but the steepness of the uptrend has decreased after the correction leg of August.

The new trend had its first wave completed at 1.5483 on November 30 and the pair has since maintained a steady trend upwards, maybe to the second wave peak. At Friday's session high, GBP/USD was 2.4 percent higher from November lows. 

The EUR/USD on the other side, had made a quick jump initially and reached a 10-day high of 1.3422 on December 3 but having failed to free from a broad downchannel, the pair slipped to 1.3163 by Thursday.

When euro-zone debt issues helped the greenback gain against the single currency, the sterling had its own technical and fundamental reasons to beat the broad strength of dollar.

But the recent uptrend of GBP/USD may not last long as the uncertainty about the reach of European problems and the scale of a related dollar rally are weighing.

Key US data including Reuters/Michigan consumer sentiment index for November and October trade balance data are expected to impact the pair later in the New York session and if the pair loses ground, first support is seen near 1.5649 (S1) before heading to the 1.5483-1.5295 region (S2).

A break below 1.5295 may end the current short-term uptrend, but it is unlikely during less liquid year-end days. 

 

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On the bigger picture, rally from mid-May low of 1.4227 is continuing but the steepness of the uptrend has decreased following the correction leg of August.