The Cable's rally in reaction to yesterday's positive U.S. Prelim GDP has hit a wall at our 2nd tier downtrend line. As with the EUR/USD, the GBP/USD failed to receive any abnormal topside volume yesterday, indicating bulls weren't fully behind the risk rally. The lack of topside conviction likely stems from the disappointing U.S. Unemployment Claims number which was overshadowed by optimism surrounding GDP data. Furthermore, Britain released an HPI number today which printed three basis points below expectations and five lower than its previous release. The impressive recovery in Britain's housing market has been at the heart of the nation's broader economic stability. Therefore, any week housing data carries a little extra weight in Britain. Regardless, the Pound continues to enjoy its relative strength, as exhibited by the large pullback in the EUR/GBP. Despite today's HPI number and last Friday's disappointing GDP data, Britain's forward looking econ data has been printing positive. Therefore, Sterling investors are taking a wait and see approach to analyze not only what Britain's Q4 performance looks like, but also how the BoE stands in regards to upcoming monetary policy.
Speaking of British econ data, Britain's news wire will heat up next week beginning with more HPI data on Monday along with Manufacturing PMI. However, investors will likely be more focused on Wednesday's Services PMI data. Since services comprise nearly 70% of Britain's GDP, investors will be looking to see if the previous Services PMI release was a sign of more positive things to come. The U.S. will be releasing some Manufacturing PMI data of its own on Monday to go along with Pending Home Sales. Therefore, it looks like we'll have an active kickoff next week.
Technically speaking, the Cable's inability to test 10/23 highs has dragged the currency pair into a wedge pattern. Fortunately for bulls, the Cable is finding some strength above 1.65, meaning the psychological level could work in the GBP/USD's favor. Furthermore, the Cable as multiple uptrend lines to rely upon. On the other hand, there's still a medium-term downtrend at work, meaning the Cable has its work cut out for it to the topside.
Present Price: 1.6507
Resistances: 1.6562, 1.6585, 1.6605, 1.6635, 1.6676, 1.6704
Supports: 1.6506, 1.6468, 1.6431, 1.6397, 1.6356, 1.6326
Psychological: 1.65, 1.60