The British pound enjoyed a smooth bullish run up the charts against the US dollar yesterday. GBPUSD opened at 1.3102 and steadily traded higher to tap a new 8-month high at 1.3164. By the New York session close, the currency pair had settled at 1.3155.
There was nothing in terms of economic data or UK elections updates yesterday. So what propelled the pound to rally to multi-month highs?
It was mostly driven by optimism that Conservatives will get majority seats in Parliament next week, in the December 12 UK general elections. Brexit has been one of the biggest uncertainties in the market and this situation would make it easier for Prime Minister Boris Johnson to pass a Brexit deal.
Later today, only the Halifax HPI report for November is scheduled for release from the UK. At 8:30 am GMT, it is expected to show a 0.2% increase in the prices of homes for sale by the Halifax Bank of Scotland.
Across the Atlantic, the highly-anticipated Non-Farm Payrolls report for November is due for release. At 1:30 pm GMT, market participants are expecting to see that 181,000 jobs were generated during the month. The unemployment rate is anticipated to remain steady at 3.6%. Meanwhile, average hourly earnings is eyed to print a 0.3% uptick.
On the daily chart, we can see that GBPUSD has broken out of the symmetrical triangle it had been trading since October. As it broke resistance at the 1.3000 psychological handle, the next near-term resistance is around 1.3350. This is where the currency pair made highs in January 2019 and is actually the highest level that it has traded year-to-date. Negative employment figures from the US as well as positive news on UK elections (ie., the Conservatives winning next week) could push GBPUSD higher.
On the other hand, if sellers dominate today’s trading, we could see a pull back. Drawing the Fibonacci retracement tool from the low of November 22 to yesterday’s high, GBPUSD looks like it may find support at the 61.8% Fib level. This area which is around 1.2950 coincides perfectly with the market’s previous highs from October 22 to November 20. If the NFP report comes in better than expected or negative news on UK elections (ie., the Conservatives losing their lead ahead of the elections) may drag GBPUSD down to this price level.Download our latest quarterly market outlook for our longer-term trade ideas.