ended the year on an up note, breaking above former support at the
1.2300 level with a close at 1.2346 on Friday. However, given that
trading was thin last week due to the holidays, it will be important
that the pair sustain the break above resistance in order to suggest a
follow through to the next level of resistance, near the 1.2500 level,
Should GBP/USD move to the downside and drop back below 1.2300,
support stands at last week’s low near 1.2200, followed by 1.2100,
representing the lows established October 11 and 25. Key support below
this level is at the October 7 flash crash low at 1.1950.
Longer term, GBP/USD has essentially been consolidating since
bottoming in October 2016. A sustained breakout from the consolidation
phase, the high of which is at 1.2775 and represents a test of the lows
established in July and August of 2016 at the 1.2800-1.2866 zone, is
required to suggest an important, sustainable bottom has been
established and a broader uptrend is underway.
In next week’s trading, one of the main focuses will be the U.S.
employment report, due to be released on Friday. Consensus estimate is
for an increase of 175K, following a reading of 178K in November. This
report will be important in regard to the pace of interest rate
increases in 2017.
Also due in next week’s trading in the U.S. is the construction spending and the ISM Index on Tuesday, FOMC
minutes on Wednesday and the ADP employment change as well as the ISM
Services Index Thursday. The trade balance and factory orders are also
due to be reported on Friday, along with the employment report.
The Pound to US Dollar exchange rate extended its losses on Tuesday
afternoon as news emerged that an experienced UK-EU ambassador has
GBP/USD remained below the level of 1.23 for most
of Tuesday’s European session and looked on track to fall as low as
1.21 in the coming week.
This was largely due to news that the
UK’s senior ambassador to the EU has resigned despite the Brexit process
mere months away. Sir Ivan Rogers was known as one of the most
experienced UK-EU diplomats.
The Pound US Dollar exchange rate trended narrowly in the wake of a positive UK Manufacturing PMI.
the manufacturing sector showing solid expansion in December the GBP
USD exchange rate struggled to overcome the underlying bullishness of
the US Dollar.
With expectations for the latest ISM manufacturing
index positive and bets on the Federal Reserve raising interest rates
sooner rather than later the ‘Greenback’ is likely to maintain its
dominance over the Pound in the near term.
There was some disappointment when November’s
US trade deficit was revealed to have widened further than anticipated,
particularly as this was coupled with an increase in jobless claims.
the US Dollar (USD) was quick to recover from its initial downtrend as
investors remained assessed that this bearish data was not likely to be
enough to deter the Federal Reserve from raising interest rates again in the near future.
As risk appetite generally faded the Pound US Dollar (GBP USD) exchange rate lost some of its momentum in the final trading session of 2016, although the pairing maintained a narrow uptrend.