GBPUSD rallied from its intraday low of 1.2877 to peak at 1.2940. By the end of Friday’s trading, it was up with a 34-pip gain at 1.2937. On a monthly basis, however, the British pound only scored a measly 9-pip win against the US dollar.
The rally on the pound on Friday may be attributed to profit-taking ahead of what looks like a busy week. Across the Atlantic, the much-anticipated non-farm payrolls report is due this Friday. It’s going to be closely watched by market participants because it’s the same data that the Federal Reserve will look at to base its future monetary policy decisions.
For today, the ISM manufacturing PMI report is scheduled for release at 3:00 pm GMT. The survey is expected to show that purchasing managers in the industry still see a contraction. The forecast is below the 50.0 baseline reading at 49.2. However, this figure is still better than October’s 48.3.
UK’s final manufacturing report for November is also due today. Considered as a second-tier report because no revisions are expected from its earlier reading of 48.3, it will be released at 9:30 am GMT.
It’s worth noting that GBPUSD gapped lower to start this trading week. It opened roughly 30 pips below Friday’s close at 1.2907. This move can be attributed to the poll results released over the weekend. According to Survation, Conservatives lead the general elections by 9 points. This may have been bearish for the pound because this reading is much smaller than the 14-point advantage which was reported by the same poll two weeks ago.
Remember that the UK is having their general elections on December 12. Conservatives winning majority is bullish for the pound because it indicates that Prime Minister Boris Johnson will have an easier time passing a Brexit plan to Congress. While other polls show that Tories have the lead, the latest one from survation may have reminded market participants that it’s not a done deal yet.
On the weekly chart, we can see that GBPUSD has broken past resistance on the falling trend line (from connecting the highs of April 15, 2018, March 10, 2019, and April 28, 2019). For the most part of November, the currency pair just consolidated and formed what looks like a bullish flag. In forex trading, this chart pattern is interpreted as a bullish indicator.
A break above November highs at 1.2983 could mean that the currency pair may soon make its way to resistance at 1.3379. This is the price where it hit highs in March 2019.
On the other hand, the bullish flag will be invalidated if we see a strong bearish candle close below November lows at 1.2761. If this happens, GBPUSD could re-test the previous falling trend line for support at 1.2570. This price level is also a previous support level for December 2018.Download our latest quarterly market outlook for our longer-term trade ideas.